SLAM DUNK FUNDRAISING – PART 3
Karl Dakin
I help you overcome challenges to raising capital. Take advantage of my Motivated Money Method to identify those investor candidates that are most likely to invest. Top expert in fundraising.
QUICK CALENDAR
NOTICE: As an Adjunct Professor at the University of Denver, I will be leading a class of students in travel to the country of Belize from March 24th to March 30th in the course FIN 4700 – International Financial Transactions. As a result, I will have limited and delayed ability to respond to phone calls, emails, and comments.
In addition to this Instant Funding newsletter, I host the Successful Funding show, appear as a guest on various podcasts and television shows, speak at various events, and present my own educational programs. Presented here is a quick listing of upcoming opportunities to share information, learn, or meet in person or via videoconferencing. More info below.
Don Cohen – Monday, March 18, 9 am MDT and Wednesday, March 20, 9 am MDT – LinkedIn Live
Successful Funding – Financial Record Preparations – Tuesday, March 19, 8 am MDT – LinkedIn Live
Successful Funding – Reg CF Crowdfunding – Thursday, March 21, 8 am MDT – LinkedIn Live [SPECIAL THURSDAY SHOW]
NO SUCCESSFUL FUNDING SHOW ON MARCH 26.
Successful Funding – Business Acquisitions – Tuesday, April 2, MDT – LinkedIn Live
SuperCrowd 2024 – Impact Crowdfunding – Wednesday/Thursday – April 17/18 - Online
?Successful Funding – Community Building – Tuesday, April 23, 8 am MDT – LinkedIn Live
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SLAM DUNK FUNDRAISING – PART 3
?For an investor candidate considering an investment, it is all about the exit. An exit is when the term of the investment ends. At that time, the investor gets a return on their investment, dollar for dollar, and a return on their investment, representing anything above the amount of their investment.
?To achieve a slam dunk investment, the investor candidate needs to know when, how and how much. When will the investment end? How will the small business get together the cash to payback the investment? How much will the investor candidate be paid if they make the investment?
?Without this information, the investment opportunity becomes unclear. It may or may not match the investor candidate’s criteria. It may take too long. The return on investment may be too low. The exit may never happen. Without clarity, there is lower credibility. How can an investor candidate trust their money with a small business if its leadership cannot articulate the investment exit?
?As an example, a startup may offer an investor a choice between a promissory note for a loan or stock in the business representing a share of future profits. Both options represent the same amount of risk. The success of the business is necessary to pay back the loan or to share profits. However, the promissory note has a due date and a rate of return. This provides a level of certainty with regard to the investment that is not attained with a payback of the investment through the sale of stock to an unknown buyer at an unknown date in the future at an unknown date.
?If a small business has not completed a cash flow projection, then it cannot share with an investor candidate a valuation. There is no possibility of anticipating the rate of return.
?Even with a cash flow projection, the valuation is based upon a projected exit date from the investment. Without an exit date, it is still impossible to calculate a possible rate of return. The best that can be done is for the business to project rates of return if an exit from the investment is completed at different dates in the future.
?If no exit from the investment is planned by the small business, it is possible that the investor may find themselves trapped in the investment. Assuming the investment is a private issuance by the small business, the investor may only be able to exit if they can find someone else who is ready and willing to step into their shoes. This challenge is not as difficult as it used to be, with new businesses now forming and obtaining licenses to facilitate secondary sales.
?A small business may structure an exit for its investors. This may be accomplished by:
·?????? Buying the investment back from the investor
·?????? Arranging from someone else to buy the investment from the investor
This transfer of ownership may be hardwired into the investment agreement, making it a contractual obligation that is as strong as the terms of a promissory note. Even with a contractual commitment, the investor may need to see specific plans for how the investment exit may be achieved.
?Alternative investment structures may provide some elevated certainty of repayment of the investment. As an example, if the small business entity is in the form of limited liability company or partnership instead of a corporation, earned profits may be passed through to the investors from time to time.
?Another alternative investment structure may be use of a revenue sharing arrangement. In this situation, payments are made to the investor out of revenue as sales are made from time to time.
?In both of these alternatives, there remains no certainty that the investor will be paid back their investment or that they will earn any rate of return. However, getting any money back is perceived as superior to the possibility of getting no money back.
?In summary, any investment offer that fails to state the date and projected amount of payback will be viewed less favorably than one that does. In a world competing for the money of the investor candidate, a small business must pay attention to providing this information.
领英推荐
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SUCCESSFUL FUNDING
Tomorrow, on March 19 at 8 a.m. MDT, on my Successful Funding show my guest will be Lucas Marquardt who provides part-time CFO services through Precision Financial LLC. We will be talking about ‘getting ready to receive funding.’
In one week, in a special Thursday show on March 21, 8 a.m. MDT, my guest will be Tom Bassford, CEO of EquityVest – a Regulation CF equity crowdfunding platform. This new platform enables access to capital by “Faith-Driven Entrepreneurs, Businesses, And Causes They Believe In.”
There will be no Successful Funding show on March 26 as I will be engaged in teaching a course on International Transactions for the University of Denver in the country of Belize where students will be immersed in how business is conducted in a different country.
?The Successful Funding show on my LinkedIn profile will repeat weekly at 8 am MST on Tuesdays. You may register to attend by going on LinkedIn, searching for Events, clicking on the Events button, searching for Successful Funding, and then clicking on the Attend button. You should receive an email with a link to save to your calendar. You can also click the Share button and obtain the URL link to the show to put it in your calendar.
You may view all of the Successful Funding shows in my Posts on my LinkedIn profile at: https://www.dhirubhai.net/in/karldakin/
??DON COHEN
I was a guest on Don Cohen’s show last week, yesterday and today.
You can view a recording of last week's show at:
?Other shows where I have been a guest can be viewed on Don Cohen's Linkedin profile page under Posts.
??SUPERCROWD 2024
?I will co-host SuperCrowd 2024 , "The Impact Crowdfunding Event of the Year,” held online on April 17th and 18th.
I will make a presentation at SuperCrowd 2024 on April 18th at Noon MDT on Customer-Focused Crowdfunding. I will share my thinking and designs of investment crowdfunding offers that include products, discounts, charitable gifts and equity ownership.
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Karl Dakin, the Capital Coach
Dakin Capital LLC
Inventor of World’s First Airbag Jeans “5 People Saved…”
8 个月This is interesting. Do you mind connecting so we can discuss more about it?
Small Business Owner at Pad Delux LLC
8 个月Interesting
Exited founder turned CEO-coach | Helping founders scale their companies without sacrificing themselves.
8 个月Transparency is key when it comes to fundraising!
First Time Founder & CEO | Helping companies hire top talent from SOUTH AFRICA, while saving $40k+ per employee.
8 个月Transparency is key when pitching to investors! ??
Founder at Earthship Packaging
8 个月Didn’t realize I was following a fellow denverite :) thanks for the hot tips professor