management team firmly believe that investors can and will add value to the venture. With this belief, the team can begin to identify those investors who bring expertise to the venture. Cash (low versus high rate of return re¬quired is an important aspect of the "equity versus other" financing decision.
Deciding who should invest is a process more than a decision. The management team has a num¬ber of sources to consider. There are both informal and formal investors, private and public markets. The single most important criterion for selecting in¬vestors is what they can contribute to the value of the venture—beyond just funding. Angels or wealthy in¬dividuals are often sought because the amount needed may be less than the minimum investment required by formal investors (i.e., venture capitalists and private placements). Whether a venture capital¬ist would be interested in investing can be deter¬mined by the amount needed and the required rate of return expected.
Yet, entrepreneurs should be cautioned that "only 30 percent to 40 percent of the companies seeking private equity actually wind up getting it at the end of the process. ° Additionally, the fees due the invest¬ment bankers and attorneys involved in writing up the prospectus and other legal documents must be paid whether or not the company raises capital.