Raising Capital for Businesses?

[QLADisciple]

Hello. What do you think of the idea of raising capital for other businesses? For example, a startup that's growing... they're looking to raise 1m in debt or equity. What if I managed to do this for them, and take 2% off the top as a success fee for example?

Everyone needs money, and with some hustle I could surely raise a portion of the money needed out there, and I'm willing to bet people will pay me for it... so what do you guys think?

 

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[theag]

Great idea! You might be on to something!

http://en.wikipedia.org/wiki/Investment_banking

 

[QLADisciple]

Yes you're right, it would basically be IB... I should look into the legalities myself, but I believe you need to be SEC-registered in the US to be a broker which can add to your costs dramatically and slow everything down. I'm based in the UK, so it may be easier.

I guess I'm just putting this idea out there for criticism since it's generally good to recognise any not-so-obvious flaws going forward... Oh and to hear from any first-hand experiences (if possible) would be useful...

But if there aren't any immovable roadblocks I guess it's full speed ahead..!

EDIT: Also, I assumed your post was sarcastic, but are you semi-serious about it being a good idea regarding viability for a standalone operator?

Double EDIT: Without even doing research I think it would require FSA registration in the UK, which could be difficult... I'll look into this.

 

[theag]

I'm not saying its a bad idea in general. In fact my longterm goal involves this. But I think its a pretty bad idea to help other businesses raise money if you dont have any experience or knowledge in the area yourself, be it as an investment banker or raising money for your own business. This is one of the few areas where you really need to know your shit, IMO.


Just "connecting" people on the other hand, you dont need knowledge but a big network. Hard to get a fee just for connecting though. How many multi millionaire investors and investment managers do you know that you could connect entrepreneurs with?

 

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[QLADisciple]

Well I have knowledge in the area but not experience. However, if I shoot for established small businesses with adequate collateral and cash flow to secure a reasonable amount of debt, say for CAPEX or perhaps an acquisition of another business, I think it would be more about hustling and talking to every bank out there - even the more expensive shops.

But since I'm (relatively-speaking) very young, it may be wiser to target startups and come across as "part of the team"... and focus on raising VC instead. Because with the first scenario it might help to have some grey hairs...

EDIT
To respond your edit... Fair point regarding the connecting idea, but as you say it's very easy to be cut out of the deal. To be fair, to raise debt it doesn't take a whole lot of knowledge to understand projections and capital structures... interest rates are going to be floating based on prime or LIBOR, so the expense side is generally non-negotiable, and so it will all come down to hustle and being confident with presentations. This is assuming that the projections are realistic and in the "safe" zone.

With a startup/VC it'd be a whole different animal definitely and admittedly...

 

[Avus]

how about brokering the sale of ventures?

I am trying to offload the project in my sig if you want to test this out lol.

 

[BigBrianC]

Join startups in a consultant type role that also has you providing leads for vc. Could be fastlane if you expand and productize, or if you hit one big and then can become IB like you discussed in OP.

 

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[Ninjakid]

I think you're onto something. The best businesses are ones that solve problems, and actually this is a problem that I think lots of people have; they know they need to raise money, but can't find anyone with the big bucks.

 

[AndrewNC]

Hello. What do you think of the idea of raising capital for other businesses? For example, a startup that's growing... they're looking to raise 1m in debt or equity. What if I managed to do this for them, and take 2% off the top as a success fee for example?

Everyone needs money, and with some hustle I could surely raise a portion of the money needed out there, and I'm willing to bet people will pay me for it... so what do you guys think?

Hand me an investment check for $1,000,000 and I'll let you keep $20,000 of it.

 

[Oswalito]

Actually, I don't think this is a bad idea at all.

You'd basically be a salesman. And if VC is raised, you get to keep a fee. As long as all parties agree to it, I don't see why you'd get cut out and it is indeed a door into IB.

Lots of startups, including mine, opt for self-funding for X reasons (don't think anybody will want to invest etc) and maybe you know something that we might not know that would make us realize that we could potentially find someone willing to invest somehow.

I'd say you should give this a shot. It's relatively risk free on your end, other than putting in the time and effort. Only thing on the line here might be your personal credibility.

 

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[Lex DeVille]

I don't see why this wouldn't work. I mean, if someone took the time to build, market, and operate a successful crowdfunding campaign for a startup, and took their cut off the top, I think this would be worth something to a lot of people. My guess is that there are already services like this, but that doesn't mean it won't be profitable for someone else.

 

[Oswalito]

I don't see why this wouldn't work. I mean, if someone took the time to build, market, and operate a successful crowdfunding campaign for a startup, and took their cut off the top, I think this would be worth something to a lot of people. My guess is that there are already services like this, but that doesn't mean it won't be profitable for someone else.

Exactly.

I personally have never thought of getting someone to handle a crowdfunding campaign for me but if the person does it, we agree and it works... Why not give a cut.

 

[QLADisciple]

Thanks guys... a little research tells me I would need a lawyer as this is definitely a regulated business. However I believe if I join a company first and focus on developing one company's financial position for 6-12 months, I wouldn't need to be regulated... or at least I think it would allow me to lay lower than if I start a brokerage-type firm straight away. Seems like a feasible entry point. I will definitely consider this upon my graduation...

 

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[Oswalito]

Thanks guys... a little research tells me I would need a lawyer as this is definitely a regulated business. However I believe if I join a company first and focus on developing one company's financial position for 6-12 months, I wouldn't need to be regulated... or at least I think it would allow me to lay lower than if I start a brokerage-type firm straight away. Seems like a feasible entry point. I will definitely consider this upon my graduation...

I'd love to know more about you. I'm always building my team so who knows...

Hit me up with a pm with a little bit about you. I'm on my phone right now but I would definitely like to discuss further with you.

 

[Bellini]

Hello. What do you think of the idea of raising capital for other businesses? For example, a startup that's growing... they're looking to raise 1m in debt or equity. What if I managed to do this for them, and take 2% off the top as a success fee for example?

Everyone needs money, and with some hustle I could surely raise a portion of the money needed out there, and I'm willing to bet people will pay me for it... so what do you guys think?

I would totally pay someone to do this. Sounds like a great idea.

If I could find someone in the U.S. that can do that for 2% I would definitely use them.

I think it takes certain skills to be a good fundraiser and if you have those skills, then by all means, let people know about it.

 

[dirk.wert.3]

I would

 

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[Kevin Peter]

Startup Incubators do this. They help you setup as well as raise money tipping off a share.

 

[Bellini]

Startup Incubators do this. They help you setup as well as raise money tipping off a share.

Aren't those 'Startup Incubators' mostly for tech companies?

 

[Kevin Peter]

Aren't those 'Startup Incubators' mostly for tech companies?

Not necessarily. There are real good creative teams out there with tie ups with the VCs.

 

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