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Raising Money

Should You Raise Capital?

Over the years I’ve raised over $300 million for 22 different projects

My recommendation is to avoid raising money if at all possible.

There are a number of reasons to raise money:

  • If you are in a market where the window of opportunity is going to be quite short and you have a lot of expenses you can’t cover on your own.

    A good example would be when you creating a new product in a competitive market means competitors will be following in your footprints so capturing the market share quickly is important.
  • If you need a lot of expensive equipment to even get your first customers

    A good example is a company I helped go from $0.00 to over $300 million in less than 3.5 years. We needed millions of dollars in capital for some large computers and some expensive central office telephone equipment.

Some of the reasons not to raise money are:

  • The market isn’t very competitive so you can take a slow-growth mode and self-fund yourself.
  • You have a service that doesn’t require much if any, equipment to perform the service.
  • You have a product or a service that has at least an 80% profit margin. You can generally self-fund businesses like that.
  • You have to be prepared for a lot of phone calls from investors asking about how their money is doing. At one company they had to hire a full time person just to answer investor questions.
  • You don’t desperately need it and you can’t find any interested investor that is well connected. It is preferable to get an investor that has some great connections related to your business.

    A good example is a business I was involved with targeted hotels. One of the investors was very well connected. One phone call landed us all of the Trump properties. Another phone call landed us dozens of hotels in Las Vegas. A third phone call landed us a relationship with a large network marketing organization resulting in over $100 million in sales.

Of course, there are exceptions to the above examples so don’t make it a hard and fast rule.

Contact Dan Swanson if you would like help raising money.