Raising Brass

Raising brass: Convincing Investors to Chip Iin

When I started brass|MEDIA Inc., I was a 19-year-old, cash-strapped college freshman. To get the company off the ground, I had to raise money. After approaching more than 200 potential investors, I ended up raising several hundred thousand dollars from eight people. Here are some key areas that contributed to my money-raising success.

Determination. Eight out of 200 investors is a 4% success rate. That's a lot of rejection. Some people I approached told me that only a fool would invest in my company, while others just didn't take me seriously. When you do get a promising lead, don't expect to close an investor the first time you meet. There were some people I talked with for nearly a year before they invested.

Talk to anyone. If I heard your sister's best friend's uncle had money, I would try to get an introduction. If I saw a Mercedes in the parking lot of a grocery store, I'd strike up a conversation with the owner. You have to truly be passionate about your business and willing to approach anyone.

Sweeten the pot. The hardest investor to get is the first. Some-times to get the ball rolling you need to provide an incentive. I offered initial investors a little extra in stock warrants at a substantially lower price than later investors.

Introductions. Once someone invests, ask for introductions to other potential investors. Many of my investors already knew each other, and I was able to take advantage of those relationships.

A plan. As I was raising money from investors, I was also competing in university business plan competitions. Having a solid business plan and placing in competition finals lent credibility to my cause. The plan also explains how investors will receive returns. Plan on offering a few options, like scheduled payments or the promise of profit when the company is acquired or receives additional funding.

Sweat equity. Investors have to know that you're committed to the company and won't blow their money. You have to show that you've worked (and will continue working) your butt off for the business.

Valuation. The valuation of a company is how much you think the company is and will be worth. This helps determine how much ownership an investor's money can buy. In the early stage of a company it's more art than science. Compare your valuation to similar companies and be reasonable with investors so you don't turn them off with unrealistic demands. Make sure to keep more than 50% ownership so you can maintain control.

Advisors. I had a couple of business advisors, which helped the company's legitimacy. My dad also came on as co-founder of the company. As a young entrepreneur, it definitely doesn't hurt to have a few older people to add credibility.

There are numerous ways to structure companies and raise funds, which is why it's important to begin with people you trust. Though there may only be a 4% chance of convincing investors, with enough work and determination you can start a company of your own.

By Bryan Sims, CEO, for Brass Magazine in partnership with Peoples State Bank


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