Everything You (Don’t) Want To Know About Raising Capital

Most entrepreneurs understand that if the fundamentals of a business idea—the management team, the market opportunities, the operating systems and controls—are sound, chances are there’s money out there. The challenge of landing that capital to grow a company can be exhilarating. But as exciting as the money search may be, it is equally threatening. Built into the process are certain harsh realities that can seriously damage a business. Entrepreneurs cannot escape them but, by knowing what they are, can at least prepare for them.

After ten years of hard work and sleepless nights to get the company to $5 million in sales, the founder of Seattle Software (the disguised name of a real company) was convinced he could hit $11 million in the next three years. All he needed was cash. Ten banks refused to extend his credit line and advised him to get more equity. He met a lawyer at a seminar for entrepreneurs who said he would take the company public in Vancouver or London and raise $2.5 million fast. The founder was tempted to sign him on. 

Texas Industrial (again, disguised) had grown from an idea to a $50-million-a-year leader in the industrial mowing-equipment business. The company wanted to keep growing and decided it was time for an initial public offering. The underwriters agreed. They started the paperwork and scheduled a road show for early November.

The founders of both these companies thought they were prepared for the fund-raising process. They put together business plans and hired advisers. But that isn’t enough. Every fund-raising strategy and every source of money implies certain out-of-pocket expenses and commitments of various kinds. Unless the entrepreneur has thought them through and decided how to handle them ahead of time, he or she may end up with a poorly structured deal or an inefficient search for capital.

Entrepreneurs should not be afraid to seek the money they need. Though they may be setting sail on dark waters and will always be at a disadvantage when negotiating with people who make deals every day, they can take steps to ensure that they get the capital they need, when they need it, on terms that do not sacrifice their future options. The first of those steps is knowing the downside of the fund-raising process.

Raising Money Costs A Lot

The lure of money leads founders to grossly underestimate the time, effort, and creative energy required to get the cash in the bank. This is perhaps the least appreciated aspect of raising money. In emerging companies, during the fund-raising cycle, managers commonly devote as much as half their time and most of their creative energy trying to raise outside capital. We have seen founders drop nearly everything else they were working on to find potential money sources and tell their story.

The process is stressful and can drag on for months as interested investors engage in “due diligence” examinations of the founder and the proposed business. Getting a yes can easily take six months; a no can take up to a year. All the while, the emotional and physical drain leaves little energy for running the business, and cash is flowing out rather than in. Young companies can go broke while the founders are trying to get capital to fund the next growth spurt.

Performance invariably suffers. Customers sense neglect, however subtle and unintended; employees and managers get less attention than they need and are accustomed to; small problems are overlooked. As a result, sales flatten or drop off, cash collections slow, and profits dwindle. And if the fund-raising effort ultimately fails, morale suffers and key people may even leave. The effects can cripple a struggling young business.

One start-up began its search for venture capital when, after nearly ten years of acquiring the relevant experience and developing a track record in their industry niche, the founders sensed an opportunity to launch a company in a field related to telecommunications. The three partners put up $100,000 of their own hard-earned cash as seed money to develop a business plan, and they set out to raise another $750,000. Eight months later, their seed money was spent, and every possible source of funding they could think of—including more than 25 venture capital firms and some investment bankers—had failed to deliver. The would-be founders had quit their good jobs, invested their nest eggs, and worked night and day for a venture that was failing before it even had a chance to get started.

The entrepreneurs might have spent their time and money differently. We asked them what their sales would have been if they had spent the $100,000 seed money over the previous 12 months to generate their first customers. Their answer? One million dollars. The founders had not been prepared to divert so much of their attention away from getting the operations up and running. Raising money was actually less important to the company’s viability than closing orders and collecting cash. 

Even when the search for capital is successful, out-of-pocket costs can be surprisingly high. The costs of going public—fees to lawyers, underwriters, accountants, printers, and regulators—can run 15% to 20% of a smaller offering and can go as high as 35% in some instances. And a public company faces certain incremental costs after the issue, like administration costs and legal fees that increase with the need for more extensive reporting to comply with the SEC. In addition, there are directors’ fees and liability insurance premiums that will also probably rise. These expenses often add up to $100,000 a year or more.

Similarly, bank loans over $1 million may require stringent audits and independent reviews to ensure that the values of inventory and receivables are bona fide. The recipient of the funds shoulders all these costs.

The demands on time and money are unavoidable. What entrepreneurs can avoid is the tendency to underestimate these costs and the failure to plan for them.

You Have No Privacy 

Convincing a financial backer to part with money takes a good sales job—and information. When seeking funds, you must be prepared to tell 5, 10, even 50 different people whether you are dependent on one brilliant technician or engineer, what management’s capabilities and shortcomings are, how much of the company you own, how you’re compensated, and what your marketing and competitive strategies are. And you will have to hand over your personal and corporate financial statements.

Revealing such guarded secrets makes entrepreneurs uneasy, and understandably so. Although most potential sources respect the venture’s confidentiality, information sometimes leaks inadvertently—and with destructive consequences. In one instance, a startup team in Britain had devised a new automatic coin-counting device for banks and large retailers. The product had a lot of promise, and the business plan was sound. When the lead investor was seeking coinvestors, he shared the business plan with a prospective investor who ultimately declined to participate. The deal came together anyway, but months later the entrepreneurs discovered that the investor, who had decided not to join, had shared the business plan with a competitor.

In another instance, an adviser was helping an entrepreneur sell his business to a Midwestern company. Sitting in the office of a senior bank officer who was considering financing the purchase, the seller asked for more information about the buyer’s personal financial position. The bank officer called the buyer’s bank a thousand miles away, got a low-level assistant on the line, and listened in amazement as the clerk said, “Yes, I’ve got his personal balance sheet right here,” and proceeded to read it line by line.

The chance that information will get into the wrong hands is an inherent risk in the search for capital—and is one reason to make sure you really need the money and are getting it from highly reputable sources. While you cannot eliminate the risk, you can minimize it, by discussing the issue with the lead investor, avoiding some sources that are close to competitors, and talking to only reputable sources. You should in effect do your own “due diligence” on the sources by talking with entrepreneurs and reputable professional advisers who have dealt with them.

Experts Can Blow It 

Decisions about how much money to raise, from what sources, in debt or equity, under what terms—all limit management in some way and create commitments that must be fulfilled. These commitments can cripple a growing business, yet managers are quick to delegate their fund-raising strategies to financial advisers. Unfortunately, not all advisers are equally skilled. And of course, it’s the entrepreneur—not the outside expert—who must live or die by the consequences. 

Opti-Com (the fictitious name of a real company) was a start-up spun off from a public company in the fiber optics industry. Though not considered super-stars, the start-up managers were strong and credible. Their ambition was to take the company to $50 million in sales in five years (the “5-to-50 fantasy”), and they enlisted the help of a large, reputable accounting firm and a law firm to advise them, help prepare their business plan, and forge a fund-raising strategy. The resultant plan proposed to raise $750,000 for about 10% of the common stock.

The adviser urged Opti-Com’s founders to submit the business plan to 16 blue-ribbon, mainstream venture capital firms in the Boston area; four months later, they had received 16 rejections. Next they were told to see venture capital firms of the same quality in New York, since—contrary to conventional money-raising wisdom—the others were “too close to home.” A year later, the founders were still unsuccessful—and nearly out of money.

Opti-Com’s problem was that the entrepreneurs blindly believed that the advisers knew the terrain and would get results. The fact is, the business proposal was not a mainstream venture capital deal, yet the search included none of the smaller, more specialized venture capital funds, private investors, or strategic partners that were more likely to fund that type of business. Furthermore, the deal was overvalued by three to four times, which undoubtedly turned off investors.

Opti-Com eventually changed its adviser. Under different guidance, the company approached a small Massachusetts fund specifically created to provide risk capital to emerging companies not robust enough to attract conventional venture capital but important to the state’s economic renewal. This was the right fit. Opti-Com raised the capital it needed and at a valuation more in line with the market for start-up deals: about 40% of the company instead of the 10% that the founders had offered.

The point is not to avoid using outside advisers but to be selective about them. One rule of thumb is to choose individuals who are actively involved in raising money for companies at your stage of growth, in your industry or area of technology, and with similar capital requirements.

Money Isn’t All The Same

Although money drives your fund-raising effort, it is not the only thing potential financial partners have to offer. If you overlook considerations such as whether the partner has experience in the industry, contacts with potential suppliers or customers, and a good reputation, you may shortchange yourself.

How fast the investor can respond is sometimes another crucial variable. One management group had four weeks to raise $150 million to buy a car phone business before it would be auctioned on the open market. It did not have enough time to put together a detailed business plan but presented a summary plan to five top venture capital and LBO firms.

One of the firms asked a revealing question: “How do you prevent these phones from being stolen? You can’t penetrate the market unless you solve that problem.” The founders soon concluded that this source was not worth pursuing. The firm obviously knew little about the business: at that time, car phones weren’t stolen like CB radios because they couldn’t be used until they’d gone through an authorized installation and activation. The entrepreneurs didn’t have time to wait for the investor to get up to speed. They focused their efforts on two investors with experience in telecommunications and got a commitment expediently. 

Yet another entrepreneur had a patented, innovative device for use by manufacturers of semiconductors. He was running out of cash from an earlier round of venture capital and needed more to get the product into production. His backers would not invest further since he was nearly two years behind his business plan.

When the well-known venture capital firms turned him down, he sought alternatives. He listed the device’s most likely customers and approached the venture capital firms that backed those companies. The theory was that they would be able to recognize the technology’s merit and the business opportunity. From a list of 12 active investors in the customer’s industry, the entrepreneur landed three offers within three months, and the financing was closed soon thereafter.

The Search Is Endless 

After months of hard work and tough negotiations, cash hungry and unwary entrepreneurs are quick to conclude that the deal is closed with the handshake and letter-of-intent or executed-terms sheet. They relax the street-wise caution they have exercised so far and cut off discussions with alternative sources of funds. This can be a big mistake.

An entrepreneur and one of his vice presidents held simultaneous negotiations with several venture capitalists, three or four strategic partners, and the source of a bridge capital loan. After about six months, the company was down to 60 days of cash, and the prospective backer most interested in the deal knew it. It made a take-it-or-leave-it offer of a $10 million loan of 12% with warrants to acquire 10% of the company. The managers felt that while the deal was not cheap, it was less expensive than conventional venture capital, and they had few alternatives since none of the other negotiations had gotten that serious.

Yet the entrepreneurs were able to hide their bargaining weakness. Each time a round of negotiations was scheduled, the company founder made sure he scheduled another meeting that same afternoon several hours away. He created the effect of more intense discussion elsewhere than in fact existed. By saying that he had to get to Chicago to continue discussions with venture capitalist XYZ, the founder kept the investors wondering just how strong their position was.

The founder finally struck a deal with the one investor that was interested and on terms he was quite comfortable with. The company has since gone public and is a leader in its industry.

The lead entrepreneur understood what many others do not: you must assume the deal will never close and keep looking for investors even when one is seriously interested. While it is tempting to end the hard work of finding money, continuing the search not only saves time if the deal falls through but also strengthens your negotiating position.

Lawyers Can’t Protect You 

Why should you have to get involved in the minutiae of legal and accounting documents when you pay professionals big fees to handle them? Because you are the one who has to live with them. 

Deals are structured many different ways. The legal documentation spells out the terms, covenants, conditions, responsibilities, and rights of the parties in the transaction. The money sources make deals every day, so naturally they are more comfortable with the process than the entrepreneur who is going through it for the first or second time. Covenants can deprive a company of the flexibility it needs to respond to unexpected situations, and lawyers, however competent and conscientious, cannot know for sure what conditions and terms the business is unable to withstand.

Consider a small public company we’ll call Com-Comp. After more than two months of tough negotiations with its bank to convert an unsecured demand bank note of over $1.5 million to a one-year term note, the final documentation arrived. Among the many covenants and conditions was one clause buried deep in the agreement: “Said loan will be due and payable on demand in the event there are any material events of any kind that could affect adversely the performance of the company.”

The clause was so open to interpretation that it gave the bank, which was already adversarial, a loaded gun. Any unexpected event could be used to call the loan, thereby throwing an already troubled company into such turmoil that it probably would have been forced into bankruptcy. When the founders read the fine print, they knew instantly that the terms were unacceptable, and the agreement was then revised.

An infusion of capital—be it debt or equity, from private or institutional sources—can drive a company to new heights, or at least carry it through a trying period. Many financing alternatives exist for small enterprises, and entrepreneurs should not be afraid to use them.

They should however, be prepared to invest the time and money to do a thorough and careful search for capital. The very process of raising money is costly and cumbersome. It cannot be done casually, nor can it be delegated. And it has inherent risks.

Since no deal is perfect and since even the most savvy entrepreneurs are at a disadvantage in negotiating with people who strike deals for a living, there is strong incentive for entrepreneurs to learn as much as they can about the process—including the very things they are probably least interested in knowing.

By Jeffrey A. Timmons and Dale A. Sander in Harvard Business Review

Pleases contact Albert A. van Daalen for advice and support in Raising Capital Services

How To Invest Like A Hedge Fund

Ever wonder how hedge fund managers think and how they are sometimes able to generate explosive returns for their investors? You aren’t alone. For years, hedge funds have retained a certain level of mystery about them and the way they operate; and for years, public companies and retail investors have tried to figure out the methods behind their (sometimes) apparent madness.

It’s impossible to uncover and understand each hedge fund’s strategy—after all, there are thousands of them out there. However, there are some constants when it comes to investment style, the methods of analysis used, and how market trends are evaluated.

Key Takeaways

  • Some hedge funds focus on arbitrage situations, or other special situations, while others are market neutral, or make use of complicated combined long/short strategies.
  • While earnings-per-share is an important method for assessing profitability, managers in the hedge fund world are also focused on cash flow.
  • Some hedge funds will push trades through several brokers or several exchanges to pick up better returns, as well as take advantage of mispricings within the market.
  • Hedge funds buy securities on margin or get loans and credit lines to make more purchases; when these kinds of bets pay off, they pay off big, but when they fail, some companies have gone bankrupt.
  • Rather than hold a position indefinitely, hedge funds are usually disciplined enough to buy a security, benefit from a specific event that impacts the security’s price, and get out soon enough to book profits.

Cash Flow Is King

Hedge funds can come in all shapes and sizes. Some may place a heavy emphasis on arbitrage situations (like buyouts or stock offerings), while others focus on special situations. Others still may aim to be market neutral and profit in any environment, or employ complicated dual long/short investment strategies.

While many investors track metrics such as earnings per share (EPS), many hedge funds also tend to keep a very close eye on another key metric: cash flow.

Cash flow is important because bottom-line EPS can be manipulated or altered by one-time events, such as charges or tax benefits. Cash flow and the cash flow statement tracks money flow, so it can tell you if the company has generated a large sum from investments, or if it has taken in money from third parties, as well as how it’s performing operationally. Because of the detail and the breakup of the cash flow statement into three parts (operations, investing, and financing), it’s considered to be a very valuable tool.

This statement can also tip off the investor if the company is having trouble paying its bills or provide a clue as to how much cash it might have on hand to repurchase shares, pay down debts or conduct another potentially value-enhancing transaction.

Run Trades Through Multiple Brokers Or Conduct Arbitrage

When the average individual purchases or sells a stock, they tend to do so through one preferred broker. The transaction is generally simple and straightforward, but hedge funds, in their effort to squeeze out every possible gain, tend to run trades through multiple brokers, depending on which offers the best commission, the best execution, or other services to assist the hedge fund.

Funds may also purchase a security on one exchange and sell it on another if it means a slightly larger gain (a basic form of arbitrage). Due to their larger size, many funds go the extra mile and may be able to pick up a couple of extra percentage points each year in returns by capitalizing on minute differences in price.

Hedge funds may also look for and try to seize upon mispricings within the market. For example, if a security’s price on the New York Stock Exchange is trading out of sync with its corresponding futures contract on Chicago’s exchange, a trader could simultaneously sell (short) the more expensive of the two and buy the other, thus profiting on the difference.

This willingness to push the envelope and wait for the biggest gains possible can easily tack on a couple of extra percentage points over a year’s time as long as the potential positions truly do cancel each other out.

Using Leverage And Derivatives

Hedge funds typically use leverage to magnify their returns. They may purchase securities on margin, or obtain loans and credit lines to fund even more purchases. The idea is to seize on or take advantage of an opportunity. The short version of the story goes that if the investment can generate a big enough return to cover interest costs and commissions (on borrowed funds), this kind of trading can be a highly effective strategy.

The downside is that when the market moves against the hedge fund and its leveraged positions, the result can be devastating. Under such conditions, the fund has to eat the losses plus the carrying cost of the loan. The well-known 1998 collapse of hedge fund Long-Term Capital Management occurred because of just this phenomenon.

Hedge funds may purchase options, which often trade for only a fraction of the share price. They may also use futures or forward contracts as a means of enhancing returns or mitigating risk. This willingness to leverage their positions with derivatives and take risks is what enables them to differentiate themselves from mutual funds and the average retail investor. This increased risk is also why investing in hedge funds is, with a few exceptions, reserved for high-net-worth and accredited investors, who are considered fully aware of (and perhaps more able to absorb) the risks involved.

Unique Knowledge From Good Sources

Many mutual funds tend to rely on information they obtain from brokerage firms or their research sources and relationships they have with top management.

The downside to mutual funds, however, is that a fund may maintain many positions (sometimes in the hundreds), so their intimate knowledge of any one particular company may be somewhat limited.

Hedge funds—particularly those that maintain concentrated portfolios—often have the ability and willingness to get to know a company very well. In addition, they may tap multiple sell-side sources for information and cultivate relationships they’ve developed with top management, and even, in some cases, secondary and tertiary personnel, as well as perhaps distributors the company uses, ex-employees, or a variety of other contacts. Because fund managers‘ profits are intimately tied to performance, their investment decisions are typically motivated by one thing—to make money for their investors.

Mutual funds cultivate somewhat similar relationships and do extensive due diligence for their portfolios as well. But hedge funds aren’t held back by benchmark limitations or diversification rules. Therefore, at least theoretically, they may be able to spend more time per position; and again, the way hedge fund managers get paid is a strong motivator, which can align their interests directly with those of investors.

They Know When To Fold ‘Em

Many retail investors seem to buy into a stock with one hope in mind: to watch the security’s price climb in value. There’s nothing wrong with wanting to make money, but very few investors consider their exit strategy, or at what price and under what conditions they’ll consider selling.

Hedge funds are an entirely different animal. They often get involved in a stock to take advantage of a particular event or events, such as the benefits reaped from the sale of an asset, a series of positive earnings releases, news of an accretive acquisition, or some other catalyst.

However, once that event transpires, they often have the discipline to book their profits and move on to the next opportunity. This is important to note because having an exit strategy can amplify investment returns and help mitigate losses.

Mutual fund directors often keep an eye on the exit door as well, but a single position may only represent a fraction of a percent of a mutual fund’s total holdings, so getting the absolute best execution on the way out may not be as important. So, because they often maintain fewer positions, hedge funds usually need to be on the ball at all times and be ready to book profits.

The Bottom Line

Although often mysterious, hedge funds use or employ some tactics and strategies that are available to everyone. They do, however, often have a distinct advantage when it comes to industry contacts, leveraging investable assets, broker contacts, and the ability to access pricing and trade information.

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By Glenn Curtis in Investopedia

Spirituality And Business: A Systemic Overview

The download gives an interdisciplinary overview of the emerging field of spirituality and business.

It uses insights from business ethics, theology, neuroscience, psychology, gender studies, and
philosophy to economics, management, organizational science, and banking and refers to different religious convictions including Christianity, Judaism, Islam, Hinduism, Buddhism, Confucianism, the Baha’i faith, and the North-American aboriginal worldview.

The authors argue that the materialistic management paradigm has failed. They explore new values for post-materialistic management: frugality, deep ecology, trust, reciprocity, responsibility for future generations, and authenticity. Within this framework profit and growth are no longer ultimate aims but elements in a wider set of values. Similarly, cost-benefit calculations are no longer the essence of management but are part of a broader concept of wisdom in leadership. Spirit-driven businesses require intrinsic motivation for serving the common good and using holistic evaluation schemes for measuring success.

The Palgrave Handbook of Business and Spirituality, edited by the authors, is a response to developments that simultaneously challenge the “business as usual” mindset.

Keywords: #religion and spirituality, #spiritually inspired economics, #spiritually-based leadership, #business ethics, #post-materialistic management, #economic wisdom

Help To Refugees

For the first time in a long period, there is a new war in Europe. This is a disaster for Ukraine and a nightmare for Ukrainians who are now in great uncertainty about their security. By now over a million of Ukrainians have fled their homes.

If you are a refugee or you know a refugee and you need help, please send your details to albertavandaalen@pm.me and my network will do everything possible to get you or other refugees over to Western Europe.

If you can provide shelter, harbor people or have any other ideas on how to help, please contact me too.

Albert A. van Daalen Ministries (Alvadam)

Drie zeven van Socrates om informatie te filteren

Socrates zat in Athene op een bankje van de zon te genieten. Plotseling stapte er een man op hem af. “Socrates, ik moet je iets vertellen over je vriend die…”

Voordat de man zijn zin kon afmaken, onderbrak Socrates hem en vroeg: “Het verhaal dat je mij wilt vertellen, heb je dat gezeefd door de drie zeven?”

“De drie zeven? Welke drie zeven?”, vraagt de man verbaasd.

“De zeef van de waarheid is de eerste zeef. Heb je onderzocht of datgene wat je me wilt vertellen waar is?”

“Nee, ik hoorde het verhaal ergens…”, zei de man.

“Oke. Is het verhaal dan wel door de tweede zeef gegaan, de zeef van het positieve? Is het iets positiefs wat je over mijn vriend wilt vertellen?”, vroeg Socrates nu.

Aarzelend antwoordt de man: “Euh nee, dat niet. Integendeel zelfs…”

Socrates fronste zijn wenkbrauwen en zei: “Laten we dan de derde zeef gebruiken, de zeef van de noodzakelijkheid. Is hetgeen wat je mij wilt vertellen zo noodzakelijk dat ik het beslist moet horen?”

“Nee, niet echt”, antwoordde de man.

Socrates glimlachte naar de man en zei: “Als het verhaal dat je wilt vertellen niet waar is, niet positief is en ook niet noodzakelijk is voor mij, belast mij er dan ook niet mee.”

Over Socrates

Socrates is de eerste echte filosoof van de Griekse Oudheid. Voor hem onderzochten natuurfilosofen de aard van de werkelijkheid, maar zij richten zich in hun onderzoek op de fysieke wereld. In tegenstelling tot de natuurfilosofen gaat het Socrates om kennis over het denken, vooral op het gebied van de ethiek. Deze kennis zocht hij in de redelijke dialoog. Daarbij zocht hij samen met zijn gesprekspartner naar kennis, door ideeën van alle kanten te testen door middel van vraag en antwoord. De doortastende en soms opdringerige manier waarop hij dit deed viel echter niet bij elke Athener even goed, Socrates stond ook wel bekend als ‘de horzel’.                      

Deze methode wordt nu de Socratische methode genoemd. Deze methode bestaat uit twee onderdelen. Als eerste liet Socrates zijn gesprekspartner definieren wat bijvoorbeeld ‘moed’ is. Zodra zijn gesprekspartner een definitie had gegeven bekritiseerde Socrates deze definitie door bijvoorbeeld te laten zien dat tegengesteld gedrag ook als ‘moed’ kan worden bestempeld. Uiteindelijk komt zijn gesprekspartner dan in een patstelling. Er rest dan niets anders dan toe te geven dat hij slechts denkt iets te weten, maar dat hij deze opvattingen eigenlijk niet kan onderbouwen. Het idee van deze dialogen is niet om te laten zien dat iemand geen kennis had, maar had vooral een protrepische functie. Ze moest leiden tot een filosofische levenshouding waarbij men zich niet langer tevreden stelt met snelle uitspraken, maar waarbij zaken worden doordacht en op de proef worden gesteld. Deze Socratische methode is ook nu nog populair, de vorm van het socratisch gesprek wordt regelmatig gebruikt bij filosofische lezingen en er zijn zelfs officieële opleidingen tot Socratisch gespreksleider.  

Omdat er geen overlevering is van door Socrates geschreven stukken, is hetgene wat wij over Socrates weten gebaseerd op werken van anderen, met name zijn leerlingen Plato en Xenophon. Vooral Plato gebruikte de stem van zijn leraar voor ideeën waarvan het onduidelijk is aan welke van de twee ze toegeschreven moet worden. Dit is het zogenaamde Socratische probleem. 

Enkele bekende werken waarin Aristoteles terugkomt zijn de De Apologie en de Phaedo, deze gaan over de dood van Socrates en zijn iconisch geworden voor de westerse wijsbegeerte. De Atheense rechtbank veroordeelde Socrates wegens ‘het bederven van de jeugd’, maar dat hij een ‘horzel’ werd gevonden kan wel eens een grote rol hebben gespeeld. Socrates weigerde in ballingschap te gaan en accepteerde de gifbeker. Zijn laatste woorden “Crito, we zijn een haan verschuldigd aan Asklepios; betaal hem, vergeet het niet” zijn beroemd geworden, mede dankzij de vele verschillende interpretaties van deze woorden. 

Zo bevraagt Foucault in zijn colleges over Socrates de geaccepteerde interpretatie van diens laatste woorden. In tegenstelling tot de gangbare gedachte dat Socrates zijn dood als een bevrijding van het leven zag, zegt Foucault dat deze een dankbetuiging zijn aan de filosofie, en dat de verlossing waar hij naar uitziet geen verlossing van het leven is, maar een verlossing van de doxa. in deze laatste ultieme geste, offert hij zichzelf op ten behoeve van de waarheid.

Omdat Socrates met zijn vragen kwaad bloed zette, werd hij, officieel ‘wegens het verpesten van de jeugd en het ontkennen van het bestaan van de goden’ tot het drinken van de gifbeker veroordeeld. De mogelijkheid Athene te ontvluchten greep hij niet aan. Hij onderging zijn veroordeling in alle kalmte. Voordat hij het dodelijke drankje aan de mond zette, offerde hij de eerste slok aan de goden, zoals gebruikelijk was als men ging drinken.