All the articles in the world about how to raising money will not do you any good if you do not know where to look for it. This article will hopefully set you on the right path to raise either working/growth capital for your business, or funds for a special project.
Success begets success. And that was never more important as it is in fundraising. Your past financial accomplishments may not be any indication of future success, but they go a long way with investors to lessen their concerns and increase their ardor. I say this because, whether you are trying to raise $100,000 or $100 million, you want to start with those investors that trust you and know you best – and then work your way out to those who don’t know you at all. It is a simple rule that many entrepreneurs ignore.
An associate of mine who has successfully raised millions of dollars for entertainment projects said, “The job of the entrepreneur is to create a snap shot of the future. If the investor can see and share that future with you – then you will get the money. If the picture that you paint is murky and unclear, then you will not. It is that simple. They have to emotionally relate to what it is you are trying to accomplish.”
POCKET #1: Friends and Family
The people who know you best and have watched your rise to success will often be the first ones to invest in your company or business endeavor. Even if your name is not Ellison or Anschutz there is often a family member, or school classmate, who has always believed in you and will back any venture that you create. For those of us who come from humble beginnings, and went to a state college, you may have more resources than you think; former bosses who mentored you, your doctor/dentist, and others that you have helped up the ladder of success. Friends and family investors will often refer you to their friends and family. Make sure that you ask early investors for referrals.
POCKET #2: Hedge Funds & Investment Trusts
Getting into the large hedge funds and trusts requires a guide. These companies are easy enough to find, but you will probably notice that they don’t post their phone number or sometimes even their address. What they are telling you is that admittance is by invitation only. Investment bankers are you way in. Even small investment banks, like my firm, have relationships with some of these resources. It is one of our principal functions.
I like working with hedge funds and investment trusts, because they exist for only one purpose - to invest money for high wealth individuals, corporations, pension funds and even the government. Their cost of money is very low and their expectations are reasonable. They receive their funds for just 1%-3% per annum and they look to make a 6%-12% annual return on their money. They are not looking for, nor require, huge financial gains on their investments. In fact they prefer safer, more predictable ROI’s.
POCKET #3: Family Offices
Family Offices are basically trusts that have been set up by a high wealth individual or his/her heirs, to invest the money for the family. These funds can be as small as a few million, to as much as a few billion. Family offices are good resources for cause related documentary filmmakers. There is usually one all important gatekeeper to a family office. Convince them that this is a good investment and they will put it through.
POCKET #4: Foreign Sources
I have often found that it is easier to raise money abroad than it is here in the USA. Many foreign investors want to invest in American technology, filmmaking and US distribution. I have working in the UK, Russia, China and South America raising money; it is never easy but it is often rewarding. China is a particular hotbed for financing right now, but do not overlook India, Korea, Japan, Malaysia, Thailand and other countries in Asia. Be patient. It can take a year or more to build up the trust and the relationships that will get you into the high wealth investors and financing resources abroad. Make sure that you build up cordial relations with the government of the countries that you are doing business in. They can help make connections and keep you out of trouble.
POCKET #5: Vendors/Customers/Competitors
Not only will they distribute your entertainment product when it is completed, foreign sales agents and domestic distributors are often a major source of funding for up and coming entertainment entrepreneurs. You just have to show them something that they have NOT seen before from any other company. Your distributor probably started out as a creative company, and they often have a soft spot for entrepreneurs with a brilliant idea or product. Some have development funds, others have finishing funds…but most only want to take a fee for selling your finished product. You need to get to know each and every company and what their appetite for funding and distributing your project will be.
POCKET #6: Venture Capital
Venture capitalists get a bad rap. Sometimes well deserved. But they can be an almost inexhaustible resource for funding. The trick with working with a venture capitalist is not going to them in a position of weakness. You want to have gone through your first and perhaps even your second round of funding and have a well established business or technology – before you got to them for money. Don’t be daunted by the 22 year old across the table from you who has never built anything. Their Ivy League MBA probably means that they are smart…they just need to be educated. Also, venture capitalists sometimes work in packs. One VC will take the lead and spread out the risk to 4 or 5 others. Working with VC’s requires some finesse; make sure that you are adequately represented before you go down that path.
POCKET #7: Institutional Funding
Many entrepreneurs have received their funding from government grants, DARPA (Defense Advanced Research Projects Agency), non-profit foundations, universities and other institutions. It is not the easiest road, but for the right project it can be a deep pocket resource. Just ask the pharmaceutical companies.
POCKET #8: Crowd Funding
I almost hate to even mention this avenue, except for the fact that a lot of money has been raised this way for thousands of companies with nothing more than an idea. Personally, I have no interest in taking my tin cup down to the street and hoping to convince throngs of would be investors to put a dollar each in it. Having said that, I know it has worked magnificently for game developers, celebrities, and technology entrepreneurs. Who knows? It might work for you.
There are other “pockets” that I have not named, but these are some that I am personally familiar with. When dipping into your pockets of money remember these three things: One, be professional and organized; two, assemble the best team possible, investors give money to people, not widgets; and three, believe in yourself, your mission and your team as if it were a religion, fundraising is always tough road and you are going to need all that faith until you reach your goal.
Success begets success. And that was never more important as it is in fundraising. Your past financial accomplishments may not be any indication of future success, but they go a long way with investors to lessen their concerns and increase their ardor. I say this because, whether you are trying to raise $100,000 or $100 million, you want to start with those investors that trust you and know you best – and then work your way out to those who don’t know you at all. It is a simple rule that many entrepreneurs ignore.
An associate of mine who has successfully raised millions of dollars for entertainment projects said, “The job of the entrepreneur is to create a snap shot of the future. If the investor can see and share that future with you – then you will get the money. If the picture that you paint is murky and unclear, then you will not. It is that simple. They have to emotionally relate to what it is you are trying to accomplish.”
POCKET #1: Friends and Family
The people who know you best and have watched your rise to success will often be the first ones to invest in your company or business endeavor. Even if your name is not Ellison or Anschutz there is often a family member, or school classmate, who has always believed in you and will back any venture that you create. For those of us who come from humble beginnings, and went to a state college, you may have more resources than you think; former bosses who mentored you, your doctor/dentist, and others that you have helped up the ladder of success. Friends and family investors will often refer you to their friends and family. Make sure that you ask early investors for referrals.
POCKET #2: Hedge Funds & Investment Trusts
Getting into the large hedge funds and trusts requires a guide. These companies are easy enough to find, but you will probably notice that they don’t post their phone number or sometimes even their address. What they are telling you is that admittance is by invitation only. Investment bankers are you way in. Even small investment banks, like my firm, have relationships with some of these resources. It is one of our principal functions.
I like working with hedge funds and investment trusts, because they exist for only one purpose - to invest money for high wealth individuals, corporations, pension funds and even the government. Their cost of money is very low and their expectations are reasonable. They receive their funds for just 1%-3% per annum and they look to make a 6%-12% annual return on their money. They are not looking for, nor require, huge financial gains on their investments. In fact they prefer safer, more predictable ROI’s.
POCKET #3: Family Offices
Family Offices are basically trusts that have been set up by a high wealth individual or his/her heirs, to invest the money for the family. These funds can be as small as a few million, to as much as a few billion. Family offices are good resources for cause related documentary filmmakers. There is usually one all important gatekeeper to a family office. Convince them that this is a good investment and they will put it through.
POCKET #4: Foreign Sources
I have often found that it is easier to raise money abroad than it is here in the USA. Many foreign investors want to invest in American technology, filmmaking and US distribution. I have working in the UK, Russia, China and South America raising money; it is never easy but it is often rewarding. China is a particular hotbed for financing right now, but do not overlook India, Korea, Japan, Malaysia, Thailand and other countries in Asia. Be patient. It can take a year or more to build up the trust and the relationships that will get you into the high wealth investors and financing resources abroad. Make sure that you build up cordial relations with the government of the countries that you are doing business in. They can help make connections and keep you out of trouble.
POCKET #5: Vendors/Customers/Competitors
Not only will they distribute your entertainment product when it is completed, foreign sales agents and domestic distributors are often a major source of funding for up and coming entertainment entrepreneurs. You just have to show them something that they have NOT seen before from any other company. Your distributor probably started out as a creative company, and they often have a soft spot for entrepreneurs with a brilliant idea or product. Some have development funds, others have finishing funds…but most only want to take a fee for selling your finished product. You need to get to know each and every company and what their appetite for funding and distributing your project will be.
POCKET #6: Venture Capital
Venture capitalists get a bad rap. Sometimes well deserved. But they can be an almost inexhaustible resource for funding. The trick with working with a venture capitalist is not going to them in a position of weakness. You want to have gone through your first and perhaps even your second round of funding and have a well established business or technology – before you got to them for money. Don’t be daunted by the 22 year old across the table from you who has never built anything. Their Ivy League MBA probably means that they are smart…they just need to be educated. Also, venture capitalists sometimes work in packs. One VC will take the lead and spread out the risk to 4 or 5 others. Working with VC’s requires some finesse; make sure that you are adequately represented before you go down that path.
POCKET #7: Institutional Funding
Many entrepreneurs have received their funding from government grants, DARPA (Defense Advanced Research Projects Agency), non-profit foundations, universities and other institutions. It is not the easiest road, but for the right project it can be a deep pocket resource. Just ask the pharmaceutical companies.
POCKET #8: Crowd Funding
I almost hate to even mention this avenue, except for the fact that a lot of money has been raised this way for thousands of companies with nothing more than an idea. Personally, I have no interest in taking my tin cup down to the street and hoping to convince throngs of would be investors to put a dollar each in it. Having said that, I know it has worked magnificently for game developers, celebrities, and technology entrepreneurs. Who knows? It might work for you.
There are other “pockets” that I have not named, but these are some that I am personally familiar with. When dipping into your pockets of money remember these three things: One, be professional and organized; two, assemble the best team possible, investors give money to people, not widgets; and three, believe in yourself, your mission and your team as if it were a religion, fundraising is always tough road and you are going to need all that faith until you reach your goal.
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