Diary of a start-up (2): 'Please sir, can I have some more?' The search for capital

Every Easter, I used to take a couple of leisurely weeks holiday, spending time with the kids and getting involved in lots of family things. But in the blur that was Easter this year, I could only take one day off - a drawback of being involved in a start-up.

The kids had the schedule well organized. First was the Rugrats movie (where I did manage to catch up on a bit of sleep). Next, an Easter egg hunt, followed by a spell listening to my eldest's trumpet practice. Then we had a spot of shopping in town, before going mountain biking and finally rollerblading. By Easter Monday, I was relieved to get back to a comparatively low-stress schedule at the office!

One of the most important things we've had to deal with lately is preparing for a second round of external financing. We appointed Arthur Andersen Corporate Finance to advise us for the coming six months on a 'no cure, no fee' basis. The company will be helping us prepare the case, compile the supporting documentation and secure the investment. When trying to evaluate the cost of this service, we chanced upon something called the Lehman scale (http://www.silicon.com/diary2/startup.html#Lehman ) we understand to be an indicative industry standard for fees.

It's early days but so far, my business partner and I are impressed with what Arthur Andersen is doing. Most importantly, its staff are proactive and respond quickly to our questions and concerns. Before consultation, we were careful to prepare the documentation needed for the initial seed investment, and made efforts to keep the business plan and other documents reasonably up to date. As a result, we've been able to provide the consultants, Gerard, Egbert and their boss, Chris, with the relevant information quickly and efficiently so they can get the process (http://www.silicon.com/diary2/startup.html#Agenda ) underway.

One of our earliest priorities was to support our case with as much documentation as possible. This is now paying off. When we had the luxury of time, we produced things which we can now use to bring all other documentation up to date quickly. The list of supporting documentation (http://www.silicon.com/diary2/startup.html#Document ) is long. The prospect of starting from scratch to produce this now would be too much to bear.

Most of what we need in terms of figures, assumptions, estimates and supporting documentation, we already have. It's about understanding what the venture capitalists' (VC) expectations are and how best to communicate the deal-securing information to them. The key to this process is making the correct selection and then representing it in a clear and concise form.

Talking of being clear and concise, another part of preparing for approaching the VCs has been creating the initial 'invitation to invest'. It needs to provide as much key information as possible to stimulate interest, but without giving the game away. You need the VCs to read it and be intrigued enough to want to participate in the roadshow, where you make the full pitch.

Through our work on the invitation to invest, we also developed a one-page script which is the basis for our elevator pitch (http://www.silicon.com/diary2/startup.html#Elevator ). The phrase comes, as you might expect, from the US. The idea is that you meet your potential investor in the elevator on his way from the executive suite (presumably on 20th floor or higher). You have the time it takes to get down to the first floor (ground floor in Britspeak) to make your case. You need to give the complete story of the product, interest the potential investor in finding out more about the product and persuade him or her to part with serious money.

The exercise is to focus tightly on the most important features of the product: its value to potential customers and the value of the product as an opportunity for an investor. Theoretically, all of this should be condensed into 30 seconds (provided you aren't in the express elevator). Practically, you should be able to say everything comfortably in three minutes.

We have just been invited to accompany the Dutch Minister of Economic Affairs on a trip to Silicon Valley - a good opportunity for us. We are to be a kind of 'show and tell' example of a start-up. We'll have the chance to do a detailed presentation to a gathering of the great and the good of the Valley. This is likely to include some major players in the VC and IT industries.

But, as usual, not everything in the garden is rosy - we are in danger of becoming a victim of our own success. Manpower is tight, but opportunities which are too good to ignore keep coming our way. And as they weren't part of the original plan, we haven't budgeted for them.

What's more, we're still spending money faster than we had planned. There are various solutions to this: one is to find a business angel. On that score, we're looking for someone who could take an active role in the company as well as investing. Ideally, we would like someone who would handle the CFO function. Alternatively, we could just borrow some money!

And finally, for all you gardeners out there, the plants are doing fine - Ilona, our assistant, is watering them regularly.