Valuetainment - Episode 217： How To Raise Money As An Entrepreneur

00:00:00.000 I'm Patrick Bedevi, host of Valuetainment, and today I'm going to talk to you about

00:00:20.500 how to raise money as an entrepreneur.

00:00:22.960 Let's get right into it.

00:00:23.760 Question number one, okay?

00:00:24.920 Ten questions you've got to ask.

00:00:25.700 Question number one, should you even raise money today?

00:00:29.180 Should you?

00:00:30.000 Because a lot of times, some company ideas may not be a big idea.

00:00:32.880 You may have a small idea that you can go out there and pretty much bootstrap it yourself.

00:00:36.540 So should you raise money today?

00:00:37.960 That's one.

00:00:38.560 Number two, if you weren't able to go get the money, how would you make the business work?

00:00:44.660 I hear a lot of people say, I'm telling you, if I don't get the money, this thing's not

00:00:48.920 going to work.

00:00:49.300 If I don't get the money, this thing's going to fail.

00:00:50.920 So how would you make this idea work if you got no money from anybody?

00:00:55.240 Because, by the way, if you can answer that, angels and VCs are more interested in your

00:01:00.380 business because no matter what, you're going to find a way to make your business work.

00:01:03.700 The third question is, how will the money be used?

00:01:06.020 A lot of times it's easy to ask for money, but many times I think the innovator, the idea

00:01:12.860 person only thinks about themselves.

00:01:15.640 And sometimes the best way to know how to communicate with the people that have the

00:01:18.260 money is, if you were this person, if you were this person, would you give money to

00:01:23.500 your idea having all the information and wouldn't you want to know on how the money's

00:01:28.160 going to be used?

00:01:29.000 Do you have the answer to that question?

00:01:30.320 A lot of people don't.

00:01:31.100 So you've got to be able to say, if you were to give me $700,000, here's how the money

00:01:35.360 would be used.

00:01:36.200 If you were to give me $50,000, here's how the money would be used.

00:01:39.400 If you were to give me $25,000, I'm simply making a prototype so I can go and approach them

00:01:43.560 so I can show this prototype.

00:01:45.140 And the prototype company that I found costs $18,000, $6,000 is designed.

00:01:49.700 But if you have that, I will take you seriously if you're approaching me.

00:01:53.340 Number four, what's an ideal investor for you look like?

00:01:56.920 Say you have the perfect investor.

00:01:58.980 Who is that person for you?

00:02:00.160 Is it smart money?

00:02:01.040 Is it somebody that's involved?

00:02:02.740 Is it somebody that's just an idea?

00:02:04.100 Is it a contact?

00:02:04.920 Is it a connection?

00:02:06.100 Is it a relationship you're looking for?

00:02:07.600 Is it a certain community I'm in?

00:02:08.980 Do I need to be in Silicon Valley?

00:02:10.640 Because you want somebody that's going to connect you with somebody that used to work at

00:02:13.520 Google?

00:02:14.080 What does an ideal investor look like for you?

00:02:16.880 Number five, are you willing to go big and lose control or do you want to have full control

00:02:22.720 of your business?

00:02:23.380 Because whenever you ask for money, there comes a lot of other things.

00:02:27.520 These are people that are not giving you money.

00:02:29.160 You're saying, oh, okay, you lost it.

00:02:30.260 It's okay.

00:02:31.320 Don't worry about it.

00:02:32.280 You're so sweet.

00:02:33.040 You're so awesome.

00:02:34.160 These are sharks you're dealing with.

00:02:35.860 They don't care about your feelings.

00:02:37.280 They don't care about your family.

00:02:38.880 They don't sit there and say, how's your little baby doing?

00:02:41.660 Here's what they care about.

00:02:42.520 I give you a million dollars.

00:02:43.700 I expect $10 million within five to seven period.

00:02:46.560 What are we going to do to deliver this money?

00:02:48.440 So if you don't want that kind of a relationship, you want full control, maybe it may not be

00:02:52.700 an idea to go out and raise money.

00:02:54.900 Next, are you okay with accountability?

00:02:56.960 Let me explain what I mean by accountability.

00:02:59.340 It is not the easiest thing for entrepreneurs to take orders from other people, but that's

00:03:03.020 what they're going to be telling.

00:03:03.680 It's not necessarily orders, but they're going to be kind of looking for you being nimble

00:03:08.300 and being willing to listen because there's nothing worse than a relationship being bad

00:03:12.840 between the investors and the entrepreneur and the team because once there's friction

00:03:17.020 here, listen, there's a lot of ways the investors can make your life a living hell, absolutely

00:03:22.560 a living hell.

00:03:23.720 And sometimes the entrepreneur says, they can't do that.

00:03:25.560 I have their money and all this other stuff.

00:03:27.300 Believe me, there's many, many ways they can make your life a living hell.

00:03:30.260 So can you handle accountability?

00:03:32.120 Have you done enough research about the industry you're getting involved in?

00:03:35.340 And I had a guy come up to me the other day, this was so funny, real nice guy.

00:03:39.640 He says, I have this great idea.

00:03:42.000 I said, what's the idea?

00:03:42.780 He says, I'm thinking about creating a company that allows me to go out there and do auto

00:03:49.960 detail link, but I'm going to do auto detail link mobile.

00:03:53.400 So you simply, it's like Uber, you request it and I come to you.

00:03:55.940 I say, is there anybody doing this?

00:03:57.180 No one's doing it in the marketplace.

00:03:58.680 I'm the first one in the marketplace.

00:03:59.520 I said, you're serious?

00:04:00.560 No one is doing this in the marketplace.

00:04:02.320 I said, let me go out there and do some research.

00:04:03.760 So I go out there and start like, what are you talking about?

00:04:05.500 There's 15 other people I found.

00:04:07.200 I contacted this guy.

00:04:08.260 He's been in the market.

00:04:09.020 This guy's raised this much money.

00:04:10.060 Look at this link.

00:04:10.640 Look at that link.

00:04:11.460 Look at this thing.

00:04:12.160 Oh, I had no idea.

00:04:13.540 See, what I did with that guy, I will never listen to any of his ideas because he didn't

00:04:17.600 respect my time and he didn't do research for what he was doing with his business.

00:04:21.660 If you do some research, for instance, if you approach me and say, there are seven people

00:04:25.700 that are doing this.

00:04:26.340 This guy's doing this.

00:04:27.000 That guy's doing this.

00:04:27.640 This guy's doing this.

00:04:28.220 That guy's doing this.

00:04:28.780 I'm going to sit there and say, oh wow, okay, I'm taking you seriously and this is the

00:04:33.700 research I've done.

00:04:34.380 This is what I've found.

00:04:35.180 These are the, I'm being willing to listen to you.

00:04:37.620 So make sure you do a lot of research with your idea before you go in front of investors.

00:04:41.340 Eight, how unique and different is your idea?

00:04:43.600 What is your main differentiator?

00:04:45.140 We're not necessarily, I'm not looking for everything to be different.

00:04:49.000 I'm not looking for the perfect, like what was really different about Facebook over

00:04:52.720 MySpace.

00:04:53.460 MySpace had music being played and Facebook didn't have it.

00:04:55.940 So what is the real differentiator between Facebook and MySpace?

00:04:59.680 Well, it's a social media site, like MySpace.

00:05:02.100 No, it's kind of different.

00:05:03.700 It allows you to stay in contact with your peers, like MySpace.

00:05:07.520 It's not a perfect thing you're looking for, but there's got to be a certain place that

00:05:11.980 there is a differentiator that you have.

00:05:14.540 I'm LinkedIn.

00:05:15.480 What's LinkedIn?

00:05:16.480 It's kind of like, is it LinkedIn?

00:05:17.740 No, it's purely business professionals and we're going to have a monthly membership.

00:05:20.840 Okay, cool.

00:05:21.400 I'm getting a better idea about what you're talking about.

00:05:22.900 So there's got to be a differentiator and unique positioning that you're having.

00:05:25.940 Number nine, have you done the math?

00:05:28.700 Sometimes the math is what's off.

00:05:30.260 So I'll hear people say, well, I'm looking for a quarter million dollars and the valuation

00:05:35.440 of the company is, you know, a million dollars and I'm giving you 40% for a quarter million

00:05:40.780 dollars.

00:05:42.080 What do you mean 40%?

00:05:43.580 Well, I'm giving you 40% quarter million dollars.

00:05:45.400 That's not kind of how this thing works.

00:05:47.420 Where did you get the math from?

00:05:48.560 So you've got to understand how the math is as well.

00:05:50.880 So it's very basic.

00:05:51.980 If the company's worth four, I put $1.

00:05:55.040 The company's now worth five.

00:05:56.720 I own one on five, which is 20%.

00:05:59.460 Make sense?

00:06:00.340 It's not one on four, 25%.

00:06:02.620 It's one on five after I give the money.

00:06:04.560 So you've got to have the math down when you tell me what it is.

00:06:07.720 Because the moment you miss that, you know, I question the investor's going to say, if

00:06:13.640 this guy doesn't know how to do basic math on how much it's going to be, is he going to

00:06:17.300 be able to do basic math when it comes down to running out of money?

00:06:20.200 And if they run out of money, what happened to my money?

00:06:22.040 I lose my money.

00:06:22.660 You go out of business.

00:06:23.360 I'm not getting returns.

00:06:24.560 So basic math.

00:06:25.560 And last but not least, this is sometimes more relevant when you're talking to venture capitals

00:06:31.200 than angels, but it can be also relevant to angel investors, is are you building to sell?

00:06:36.500 So how soon are you planning on selling this company, right?

00:06:40.100 Is it something that you're building because you want to keep it forever?

00:06:42.520 And a lot of people do that.

00:06:43.400 That's okay.

00:06:44.000 So I need to know as the investor what I'm getting out.

00:06:47.420 And are you building a company because you're planning on selling within a five to seven year

00:06:51.000 period?

00:06:51.400 There's a sweet spot that VCs have.

00:06:53.640 They like five to seven years.

00:06:54.860 Remember, the sooner they get their money out and the higher the return they get, that's

00:06:58.540 the perfect world for them.

00:06:59.800 So if I give you a million and I get seven million in five years, guess what?

00:07:04.560 Seven X in five years, I'm in heaven.

00:07:06.300 I'm in a good place.

00:07:07.680 If I give you a million, I get three X in 10 years, I'm not happy because I could have

00:07:11.920 used my money in a different place to get a return.

00:07:13.860 So it's purely a mathematical formula.

00:07:16.180 So what is your position?

00:07:17.080 Do you want to sell?

00:07:18.000 Do you want to keep?

00:07:18.720 What is it that you're doing?

00:07:20.020 So when you do approach an angel or a VC and you've done proper research, you will

00:07:25.420 know they like to buy companies that are built to sell or they like to buy, I met with

00:07:30.420 a guy here, billionaire in Dallas.

00:07:31.900 He came and visited my office two weeks ago and they don't like to buy companies that

00:07:36.840 are built to sell.

00:07:37.580 They like to buy companies that are real solid businesses, bringing value to the consumer,

00:07:42.240 employee, staff, executive, all the team and it stays.

00:07:45.020 So it's a long term income that they're generating.

00:07:47.460 They don't want to build to sell.

00:07:48.660 So if you approach them about a build to sell idea, they're not going to be that interested.

00:07:51.980 Again, those are 10 questions you ought to ask yourself before even thinking about raising

00:07:56.400 money.

00:07:56.680 It's a big mistake people make without answering those 10 questions.

00:08:00.200 So now let's get right into it.

00:08:01.540 Six different methods on raising money.

00:08:03.880 Number one, very basic, bootstrapping.

00:08:05.920 What is bootstrapping?

00:08:07.240 I'm using my own money to start my business.

00:08:10.880 This is my own money that I'm using.

00:08:13.120 Where am I going to get the money from?

00:08:14.640 Now there are different places you can get your money from.

00:08:17.480 One is cash savings.

00:08:19.220 That is probably the best way for you to do it.

00:08:21.600 That's cash savings you're getting.

00:08:23.160 Another one is that you hear about a lot nowadays is ROBS.

00:08:26.620 It's called Rollover Business Startup Capital.

00:08:29.860 I think it's Rollover for Business Startups is what ROBS stands for.

00:08:32.860 Literally, R-O-B-S, which means you have $300,000 in your 401k.

00:08:39.020 And typically, if you take money out of your 401k, you're going to have to pay the taxes

00:08:42.260 on it and you may be paying the penalties if you're under the age of 59 and a half.

00:08:45.980 So what do you mean?

00:08:46.560 I can take the money out?

00:08:47.560 Yes, there's a way of doing it.

00:08:48.760 Talk to your accountant where you can take that money, put it into your business, not

00:08:53.280 pay any taxes or the penalties, but you have to start a 401k to be able to use that as an

00:08:58.260 investment capital.

00:08:59.680 You know, there are some pros and cons to it.

00:09:01.540 I don't recommend it, but there are some people that do recommend it.

00:09:04.780 And then there's HELOCs where some people take money out of their mortgage and they get

00:09:09.060 a home equity line of credit, low interest rate.

00:09:11.620 I take that money and I fund my business at $700,000 of equity in my company.

00:09:16.260 I'm taking $250,000 to fund my business. 0.93

00:09:19.280 And as some do with credit cards, which is absolutely pathetic.

00:09:22.140 There's a lot of people out there that will recommend you to finance your business with 0.76

00:09:25.420 credit cards.

00:09:26.060 Matter of fact, there is guys that literally will go and sell you the idea of, I have 50

00:09:31.800 credit cards here.

00:09:33.160 It's $400,000.

00:09:34.880 And guess what?

00:09:35.800 If I use this money and it fails, it's not my problem.

00:09:39.480 It's the bank's problem.

00:09:40.500 The banks have all this money.

00:09:41.820 Who cares?

00:09:42.400 I'll file bankruptcy and come back up.

00:09:44.640 Terrible idea to buy into.

00:09:46.940 It's shysters who want to make money off you and the banks.

00:09:49.560 And quite frankly, that's somebody that's not thinking long term.

00:09:51.960 Because if you ever want to build a massive company, guess what?

00:09:55.020 You got to be thinking about that one day, I may be needing a big bank to give me $600

00:09:59.420 million or $300 million or that type of money.

00:10:01.820 I ought to start building those relationships now.

00:10:04.000 But bootstrapping the basic way, it's your own cash.

00:10:06.620 You take the money, you start the business.

00:10:07.860 That's one of the ways I did it.

00:10:08.960 Now, one of the reasons why people do that is the following reason.

00:10:13.580 You get to keep control longer and you get to have a better proven product so when you

00:10:18.740 go to investors, you have something to show for.

00:10:21.440 Right?

00:10:21.680 That's the formula I took for myself on one of my businesses.

00:10:24.800 So it's bootstrapping, you're on money, you're on savings, you're on the line.

00:10:28.480 The investor says, if this guy put his life savings into it, guess what?

00:10:32.880 He's serious.

00:10:33.800 I took the approach of putting my entire life savings into it.

00:10:36.520 I grew the company and then I got an investor, Oscar de la Hoya, Gabriel Brenner, who is the

00:10:41.920 first Mexican board sports owner in America.

00:10:45.940 He owns the Houston Dynamo and Adelaia Group.

00:10:48.100 Adelaia Group is a good size fund out of New York.

00:10:50.740 It's a $5 billion fund.

00:10:52.560 Then I went and got an eight figure check from these guys on raising money, but I had

00:10:56.540 proven track record on what the numbers were looking like.

00:10:58.780 That's bootstrapping, right?

00:11:00.260 You keep more equity, you give up less later on when you ask for money.

00:11:03.580 Okay, so the second way you can raise money is a traditional loan from a bank or some call

00:11:07.420 it the SBA loan.

00:11:08.800 Now, this used to be more common back in the days, but the banks are not as loose with

00:11:14.240 their money today as they used to be.

00:11:15.980 Now, what will work for you with these banks is four different criterias they'll typically

00:11:21.220 look for.

00:11:22.100 A steady income, a 700 plus credit score, equity in your home, and the last but not least, industry

00:11:28.980 experience and expertise.

00:11:30.580 Obviously, you've got to bring your business plan and the SBA program has two different

00:11:34.040 things in America.

00:11:34.900 One is called the community program that they have, which is up to a quarter million dollars

00:11:38.980 they'll give you.

00:11:39.540 And then the other one is a micro loan, which is $50,000.

00:11:42.320 I think you've got to give 30% down payment up front for them to be willing to do that.

00:11:47.240 It's that way to go.

00:11:48.340 It's the slowest, just so you know, and it's not a fast process you're going through.

00:11:53.160 It's the least likely, and it's very slow, very annoying to go through that route, but

00:11:57.080 it is one of the routes to go to on raising money.

00:12:00.000 Number three is crowdfunding.

00:12:01.400 What are we talking about with crowdfunding?

00:12:03.360 Crowdfunding is this whole thing with GoFundMe, Kickstarter, Indiegogo.

00:12:07.860 There's so many great crowdfunders out there.

00:12:10.120 And what crowdfunding is, is exactly what it says.

00:12:13.320 Crowd, audience, large audience, funding your idea.

00:12:17.560 You go onto these websites.

00:12:19.320 It works typically if you have a prototype product and you say, here's my prototype product.

00:12:24.040 This is when I said earlier, the guy who goes and raises $25,000, you know, $18,000 for

00:12:31.080 the actual product, $7,000 for the design.

00:12:32.920 And then he takes this idea and puts it on a video and says, here's what this does.

00:12:38.220 This, this, this, this, this, this, this, this, that.

00:12:40.340 Okay?

00:12:40.820 And here's what we're asking for.

00:12:42.260 Level one.

00:12:42.860 You'll be the first one to get it.

00:12:43.940 Level two, this.

00:12:44.740 Level three, this.

00:12:45.480 Level four.

00:12:45.900 And if you want to be an investor, level five, $100,000 gets you 2% ownership in a company,

00:12:51.500 5% ownership in a company, and a board seat.

00:12:54.060 Whatever.

00:12:54.280 You can do that part with some of these sites you go to.

00:12:59.380 You know, we had an issue that happened.

00:13:00.820 You saw J.J. Watt from Houston Texans started a little, wanted to raise a couple hundred

00:13:05.940 thousand dollars for what happened in Houston after Harvey, the hurricane that hit, ended

00:13:09.560 up being a 40 plus million dollar fund.

00:13:12.360 Small account.

00:13:13.240 It spread went wild for a linebacker turned this thing into a 40 million dollar fund that

00:13:18.280 he gave to Houston.

00:13:19.480 We started off with one of our guys was raising small amount of money with a couple thousand

00:13:23.080 dollars to help Houston.

00:13:24.320 All of a sudden we got it to $55,000 and we helped so many families with their cars, homes.

00:13:29.000 So it's not that hard to do it today, especially with the access to Facebook, Twitter, social

00:13:32.860 media, Snap, Instagram.

00:13:34.600 It's a lot easier to raise money that way.

00:13:37.200 Fourth is incubators and accelerators.

00:13:39.320 There's a lot of great incubators and accelerators.

00:13:42.440 They differ.

00:13:43.320 Some of the incubators allow you to come in.

00:13:45.400 You literally come and they'll give you a little bit of money and you have mentoring.

00:13:48.820 You have people that advise you on what to do with your idea and they're kind of getting

00:13:52.120 you going.

00:13:52.540 It's a big, typically a big office space.

00:13:55.120 One of the ones we went to was in Boston.

00:13:57.320 You know, they have 300 different businesses there and you're literally sitting there.

00:14:01.820 Hey, I do this.

00:14:02.440 Anybody here does this?

00:14:03.220 Yeah, let's collaborate.

00:14:04.300 Hey, I do this.

00:14:05.200 Anybody?

00:14:05.420 Yes.

00:14:05.740 Hey, have you thought about doing this to your side?

00:14:07.620 What about if you do this?

00:14:08.380 Have you thought about contacting these guys?

00:14:10.420 And they give you some money and it's incubator, accelerator.

00:14:12.880 And eventually the goal is to go out and open up your own office, your own operation, but

00:14:16.580 they're at least getting you going.

00:14:17.760 It works very well with the younger audience.

00:14:20.040 You'll see a lot of 18, 19, 22, 23 year olds and incubators.

00:14:25.400 And by the way, there's good ones in SoCal.

00:14:27.520 There's a good one in Austin, Texas, New York, Chicago, Florida.

00:14:31.620 Nowadays, there's ones everywhere.

00:14:33.160 Tennessee.

00:14:33.620 There's a lot of great incubators that you can be a part of.

00:14:36.000 Simply go search incubator.

00:14:37.600 You're a 19 year old with a good idea and you drop out from college because you're obsessed

00:14:41.220 with your idea that you have and you got three friends you guys want to make it work.

00:14:44.540 Type in incubators in your local area.

00:14:46.600 Search which one's the best and find out a way to get connected with them.

00:14:50.580 Okay, so now that we've covered the first four, let's talk about the difference between

00:14:54.180 angel investors, which is the fifth one.

00:14:57.000 And then we'll talk about venture capitalists right after that.

00:14:58.700 An angel investor is an individual, wealthy person who made their money and is willing

00:15:04.600 to invest into another entrepreneur.

00:15:06.980 And there's two different types of angels.

00:15:08.740 One is friends and family, that's warm market.

00:15:11.280 And the other one is cold market, somebody you don't know.

00:15:14.680 Let's first talk about an angel that's a warm market.

00:15:17.340 Typically, angel is less than a million dollar investment.

00:15:20.300 Many times, it's only $25,000, $50,000, $100,000 that they put into it.

00:15:23.880 Friends and family.

00:15:24.520 Okay, so you got a mom, dad, brother, sister, uncle.

00:15:28.280 Your best friend's dad who loves you, always saw you there, loved the fact that you gave

00:15:32.420 good influence to his son or, you know, your girlfriend's father who never had a son that

00:15:38.000 likes you or your boyfriend's father who never had a daughter that likes you.

00:15:41.320 And you go up and say, you know, hey, Uncle Johnny, hey, Pops, hey, Mom, hey, Bro, hey,

00:15:46.660 Mr. Jones, look, I have this idea.

00:15:48.640 This is what I want to do and I'd like to be able to raise some money.

00:15:51.620 I need your help.

00:15:52.260 What do you think about this idea?

00:15:53.280 You go through them.

00:15:54.440 Say, I think I need around, they're going to ask you, what do you think, how much do you think

00:15:56.700 you need, I don't have $50,000.

00:15:58.060 And sometimes the best question to ask is, who do you know that would be willing to help

00:16:01.280 this?

00:16:01.500 I would love for you to be because I'll look up to you so much.

00:16:04.940 But regardless of what it is, if you can get some of your friends and family that invest

00:16:09.880 into your idea, that opens up the willingness of a cold market angel investor to be interested

00:16:17.680 in your idea as well.

00:16:19.580 Now, cold market's slightly different.

00:16:22.280 They look forward to see, if you're coming to me, has anybody in your family invested

00:16:26.240 into this?

00:16:26.660 So listen to this.

00:16:27.260 This is what they're going to say.

00:16:28.380 Have you had anybody in your friend and family invest into the business?

00:16:30.560 Yes.

00:16:30.940 Who?

00:16:31.480 My father and my girlfriend's father did as well.

00:16:35.140 How much?

00:16:35.520 They gave me $50,000.

00:16:36.740 Okay, cool.

00:16:37.600 Have you put any of your own money into it?

00:16:39.320 Yes.

00:16:39.660 I had $10,000 in savings.

00:16:41.400 I put the whole thing into it.

00:16:42.780 Interesting.

00:16:43.660 Okay.

00:16:44.320 Tell me what else you know about this industry.

00:16:46.000 Da, da, da, da, da.

00:16:46.600 Tell me what's the differentiator, those 10 questions that I asked you, that I told you

00:16:49.640 earlier.

00:16:50.280 You're presenting that to them.

00:16:51.320 Then they say, great.

00:16:52.940 Give me a few days.

00:16:53.940 What's your expectation on return?

00:16:55.260 I think we can make 7x on this in seven years.

00:16:57.720 I think we can make this kind of money, this if we do this.

00:16:59.980 No problem.

00:17:00.560 Here's $100,000.

00:17:01.580 No problem.

00:17:01.980 Here's a quarter million dollars.

00:17:03.100 Then you're doing the math and negotiation about what it is.

00:17:05.700 And this video is not about the negotiation side.

00:17:07.780 This video is simply about raising money and different ways you can go about doing it.

00:17:11.760 So now that's angel.

00:17:13.240 Now let's talk about venture capital.

00:17:15.680 This is VCs that you're dealing with.

00:17:18.040 These are firms.

00:17:18.960 These are smart people.

00:17:20.020 These are people that have dealt with a lot of different businesses.

00:17:22.740 These are people that have access to incredible resources, contacts, networks.

00:17:26.620 And so when you're dealing with them, you got to know what they want and what they're looking

00:17:30.380 for.

00:17:30.720 This is when you hear about such and such person had a series A funding of, you know,

00:17:35.840 $9 million, $15 million, or they raised this much dollars.

00:17:39.540 It's more than a million dollars.

00:17:40.820 VCs are not coming in for $600,000.

00:17:43.380 They're not coming in for $800,000.

00:17:45.360 They're coming in for real play.

00:17:47.060 Matter of fact, they're offended if you're coming in for a small-time number because,

00:17:50.620 you know, it's a billion-dollar fund.

00:17:52.600 $600,000 is going to do nothing for it.

00:17:54.400 Some of them will have a minimum.

00:17:55.340 I spoke with a guy recently.

00:17:58.080 Their minimum is $30 million.

00:17:59.500 They don't even entertain $15 million.

00:18:01.520 They will literally tell you, we're sorry.

00:18:03.700 We're not it, but you can talk to this guy.

00:18:05.520 And they'll refer you to somebody.

00:18:06.900 Don't forget to ask somebody who rejects you because you're asking for too little money

00:18:11.520 if they know anybody that's in the market of the amount of money that you're asking

00:18:14.780 for.

00:18:15.020 It's very important for you to be asking that.

00:18:16.300 So, a few things.

00:18:17.400 Number one, they want returns in five to ten years.

00:18:19.960 Some of them will push you for three years.

00:18:21.500 Remember that.

00:18:22.060 But you've got to push off three years.

00:18:23.900 Your goal is to get them seven years.

00:18:25.960 Very rarely will you get them ten years.

00:18:27.880 And here's why very rarely you'll get them ten years.

00:18:30.320 These are funds that get started.

00:18:31.780 And the fund of a lifespan is ten years.

00:18:34.240 And the first three years, they're just kind of warming themselves up on who they want

00:18:37.640 to go out there and get.

00:18:38.760 And then once they get it, they're saying, we have seven years.

00:18:41.760 We wait patiently to do this.

00:18:43.500 If you can get them at seven years, that's the sweet spot.

00:18:46.600 Next, VCs are looking for 10x returns.

00:18:49.760 That's the number they're looking for.

00:18:50.840 Remember, that is their thinking.

00:18:52.600 And they'll typically tell you, we like our returns to be around 10x is what we're looking

00:18:56.880 for.

00:18:57.180 Okay, great.

00:18:57.940 You know, we like our minimums to be 5x within a five-year period.

00:19:00.680 We like 1x per year.

00:19:02.000 Fair enough.

00:19:02.600 They're going to tell you if you're asking these questions.

00:19:04.980 And matter of fact, they'll be impressed with the fact that you're asking smart questions

00:19:08.200 like that.

00:19:08.680 They want a coachable CEO.

00:19:10.280 And they're looking for a strong team.

00:19:11.780 When I'm saying strong team, they want technical skills.

00:19:16.920 Like, for instance, we have a visionary entrepreneur.

00:19:19.360 He thinks he's going to go out there and take over the world.

00:19:21.340 Great.

00:19:21.580 But do people like working with him?

00:19:23.260 Yes, he's got a technical guy with him that's incredible coding.

00:19:26.100 Here's what he did before in the past.

00:19:27.500 And he used to work with XYZ.

00:19:29.080 Oh, wow.

00:19:29.640 And he has this other guy that's on the board that da-da-da-da-da. 0.93

00:19:32.420 Oh, wow.

00:19:32.900 I like this.

00:19:33.740 So they're looking for the team that you've put together, right?

00:19:36.560 And then an idea key differentiator.

00:19:38.660 We talked about it earlier.

00:19:40.260 And obviously, if you're taking money from a VC, you're committing to pretty much doing

00:19:45.000 something big.

00:19:45.740 Because if you're not, they have zero interest in it if it isn't something big that you're willing

00:19:50.320 to do yourself.

00:19:51.540 So that's venture capitals we're dealing with.

00:19:53.300 So now, let's talk about leads.

00:19:54.540 Where do you find these angels and these VCs that you want to be working with?

00:19:59.040 Where do you go about these guys and finding them?

00:20:00.840 Leads.

00:20:01.200 A few different places to be thinking about.

00:20:02.660 One is your personal mentors.

00:20:04.420 You literally go to people that you like and you admire and you ask them, who do you know

00:20:10.040 that dot, dot, dot.

00:20:11.960 Remember, if you answer those 10 questions and you go to your personal mentors and advisors

00:20:17.600 to ask them those questions, you're going to get more of a credible person that they

00:20:22.680 give to you.

00:20:23.520 If you have those questions answered, hey, Uncle John, I admire you a lot.

00:20:27.660 You're very successful.

00:20:29.060 Here's where I'm at.

00:20:29.980 This is my idea.

00:20:30.980 This is what I'm looking for.

00:20:32.300 Do you know anybody?

00:20:33.780 They'll typically say, how about myself?

00:20:35.420 If they don't say themselves, they'll say, yeah, you got to talk to Billy.

00:20:38.320 Let me call Billy first.

00:20:39.860 You know, he's a guy that owns an accounting firm.

00:20:41.640 He made his money from this.

00:20:42.800 Let me call him first, see what he tells you.

00:20:44.460 No problem.

00:20:45.140 So number one is people you know, your personal mentors and advisors.

00:20:48.160 Number two is go find an angel list.

00:20:50.340 Get on an angel list.

00:20:51.260 There's a lot of different sites you can literally, if you're right now, go on Google and type in angel

00:20:56.220 investors list.

00:20:58.020 You'll find it venture capitalist list.

00:21:01.740 You'll find it.

00:21:02.600 You will literally find these lists and get on there.

00:21:05.680 You know, look for them.

00:21:07.460 Best angels to be working with in, you know, your city, Austin.

00:21:11.280 Best angel investors in New York.

00:21:13.120 Best angel investors in Memphis, Tennessee, in Nashville, Tennessee.

00:21:16.660 You will generally find them if you look for them.

00:21:19.120 Then another one that works very well, which is quite frankly pretty simple to do, is local

00:21:24.820 universities.

00:21:25.380 You know, if you went to university, it's even easier because you're like, hey, I'm a USC

00:21:29.260 graduate.

00:21:29.760 I'm looking for this.

00:21:30.440 Anybody I can talk to and have a meeting with.

00:21:31.820 Oh, sure.

00:21:32.140 No problem.

00:21:32.840 I'm a UCLA.

00:21:33.700 I'm a NYU graduate.

00:21:35.060 I'm a Harvard.

00:21:35.580 I'm a Texas A&M graduate.

00:21:37.680 Can I talk to somebody here?

00:21:38.800 Sure.

00:21:39.260 No problem.

00:21:39.880 Right?

00:21:40.060 So you can go through that program to find them.

00:21:42.360 And then obviously, last but not least, you always have LinkedIn.

00:21:44.640 You have these websites on ways to communicate with them.

00:21:47.820 So that's leads.

00:21:48.640 Now, how do you approach them?

00:21:51.380 Right?

00:21:51.960 So you find seven names.

00:21:53.520 You've done your research.

00:21:54.860 These seven will be very ideal for what you're looking for.

00:21:57.940 How do you approach them?

00:21:59.240 Few things to be keeping in mind.

00:22:00.500 You've got to keep it very, very simple and not a long-winded email that you're sending

00:22:06.380 this person.

00:22:07.420 One of the best things that works when people send me an email is the following.

00:22:11.480 They'll send me an email and they'll say, hey, Patrick, I just want you to know I watched

00:22:15.960 you on an interview you did on this podcast.

00:22:19.300 And in minute 17 to minute 18, they'll put a link.

00:22:22.460 You talked about this and it changed the way I viewed business.

00:22:26.100 I really admire you for what you do.

00:22:27.800 A lot of these angels and VCs, these personalities are out there.

00:22:31.180 Either they've written a blog, they've written an article, they're on a video.

00:22:33.740 So it's not hard to find them if you do proper research.

00:22:36.940 So instantly, you got my attention.

00:22:38.560 Oh, wow.

00:22:39.300 This guy's a fan.

00:22:40.300 This guy admires the content.

00:22:41.560 This guy's starting with a compliment.

00:22:43.640 Line number one.

00:22:44.680 Two, I am a 24-year-old Harvard graduate.

00:22:48.900 I am a 26-year-old USC graduate entrepreneur who has an idea that I want to share with you.

00:22:56.700 Boom.

00:22:57.180 I am an age, executive, entrepreneur, graduate, whatever it is that I have an idea that I want

00:23:03.400 to share with you.

00:23:04.100 Then in one sentence, max two.

00:23:06.560 If you can do it in one, even better.

00:23:08.480 Many times people ask me a question.

00:23:09.920 Can I ask you a question about my business?

00:23:11.640 I'll say, ask your question in one or two sentences, max.

00:23:15.400 And they'll respond back in one or two sentences because you can do it.

00:23:17.840 It makes you actually think when I say, ask it in one or two sentences.

00:23:21.320 In one sentence or two, make your request.

00:23:24.480 My idea is dot, dot, dot, dot, dot.

00:23:26.940 So after the idea, you want to put a link in there as well to say, here's a link to a website,

00:23:31.260 a video, a promo, something that's going to explain to them what it is.

00:23:33.680 And last but not least, you ask them.

00:23:35.540 I would like to meet with you for 10 or 15 minutes to explain to you what it is that I'll

00:23:41.100 be doing.

00:23:42.260 Respectfully, last name, done.

00:23:44.000 That simple email you put out there, they'll respond to that.

00:23:47.440 This is not going to be everybody.

00:23:48.640 So let me explain to you what happens when I get these emails myself.

00:23:51.400 I look at it and I'll typically click on the link and I'll say, okay, if it's too much

00:23:55.620 information, I'm not going through it.

00:23:57.000 If it's short, I'll briefly look through it.

00:23:59.160 And then I may immediately get busy doing something else and then I may forget about

00:24:03.840 your email.

00:24:04.340 So you could follow up with me a week later on that email you sent me.

00:24:09.320 Hey, John, I just wanted to follow up with you.

00:24:11.680 By the way, great article you wrote this week.

00:24:13.420 Again, if you see another thing.

00:24:15.020 By the way, great article you wrote this week about this.

00:24:16.980 I just wanted to follow up and see if you were able to look at my email last week.

00:24:20.540 Believe me, I respect your time.

00:24:21.720 I just wanted to follow up with you.

00:24:23.340 An email like that gets my attention and it almost makes me be committed to responding back

00:24:27.520 to you because angels and investors also don't want to be somebody that doesn't get back to

00:24:32.300 people who are doing it professionally.

00:24:34.340 They won't even take your email seriously if you're not sending an email that's actually

00:24:38.160 formatted properly.

00:24:39.620 If it's too long winded, if it's copy paste, if all of a sudden the font changes and it becomes

00:24:44.380 HTML because you wrote it on a complete different platform, then you copy paste and put it on

00:24:49.000 and they can tell that you're doing copy paste.

00:24:50.980 I had a guy send me an email and he said, dear Mark Cuban, I really respect what you are as a

00:24:57.180 businessman, I admire you.

00:24:58.800 And then he apologizes and he says, I'm so sorry, I feel so embarrassed, I did a copy paste

00:25:03.680 email, I meant to say Patrick by David.

00:25:06.300 He already lost me and he probably did that to other people and you can tell he's doing

00:25:09.600 a copy paste.

00:25:10.560 People know that because they get those emails all the time.

00:25:13.420 So be able to differentiate between those two as you send it to them.

00:25:16.660 Okay, so that's number one way on how you send a letter.

00:25:19.720 The best way to get introduced to an angel or VC is somebody else introducing you to them.

00:25:24.140 If you can get another high profile, reputable person, send an email saying, hey John, this

00:25:31.880 is Patrick, I sat down with Billy and I listened to what he had to say and I think this is something

00:25:37.160 that you ought to sit down and listen to as well.

00:25:39.300 If there's any interest, please schedule a time for you and him to get together.

00:25:43.240 But I leave it up to you guys, you are not committed to do this for sending this email

00:25:46.500 and if you guys communicate moving forward, you don't need to keep me in your emails or CC

00:25:50.540 me.

00:25:51.020 I will leave that up to you guys.

00:25:52.160 Thank you, all the best, next.

00:25:53.960 I've made those introductions many times.

00:25:55.640 When people ask me to make an introduction to somebody, it happens.

00:25:58.740 Once you do that, you've got to be patient.

00:26:00.660 You see, raising money can be a full-time job by itself.

00:26:03.320 And the key to all this is to be patiently aggressive.

00:26:05.960 You've got to be aggressive and assertive, yet you've got to be patient because the process

00:26:09.420 may take 6 to 12 months as you're going out there raising money for your business.

00:26:13.440 So everything I cover with you here today is how to go raise your money.

00:26:17.580 But I can tell you, above all, if you go out there and build a real business, if you go

00:26:23.900 out there and build a real model, if you go out there and prove that your business model

00:26:27.680 works, if you go out there and do it in a way where you're attracting people to you,

00:26:31.740 where investors want to have their money in there, where this is getting to the point

00:26:34.960 where syndicates are begging to say, I also want to get a million in, I also want to get

00:26:38.200 a half a million in, I also want to get this, because all these guys want to be part

00:26:41.500 of your business, then you have more influence and people that want to help your business

00:26:44.840 get to the next level, more context, more introduction, more site edifications, opportunities,

00:26:50.160 all these other things.

00:26:51.380 If you truly focus on building a real legitimate business based on systems that's replicatable,

00:26:57.300 that's scalable, that brings more interest from other people that want to invest into

00:27:01.200 your business.

00:27:01.600 And keep this in mind, I didn't really get into revenue-backed funding here and mezzanine

00:27:06.340 and what it is to do mezzanine and what happens if you're in a bad place and you're

00:27:10.540 trying to get money but your business is going down, you're not really selling so you need

00:27:13.660 to get money and it's a different kind of money and they negotiate harder, this is not

00:27:17.160 that video, we may do it on another time or we may do it on a private mentoring, this is

00:27:20.760 purely an episode to teach you the basics when it comes on to raising money.

00:27:24.800 And last but not least, listen, let's come together and help shift the way people think

00:27:29.660 about business, entrepreneurship and capitalism because the true vision and mission of

00:27:34.260 Valuetainment is to one day have a world unemployment of 0%.

00:27:37.880 If Bill Gates says he wants to eliminate malaria, we want to eliminate unemployment around the

00:27:43.360 world and I believe it's possible, it may take us 50 years, it may take a generation

00:27:46.440 or two, but I believe it's possible only if entrepreneurs around the world come together

00:27:51.660 and spread this message to as many people as possible so people see the value and the

00:27:55.680 light of proper, compassionate capitalism.

00:27:58.640 Thanks everybody for listening and by the way, if you haven't already subscribed to

00:28:01.980 Valuetainment on iTunes, please do so, give us a five star, write a review if you haven't

00:28:07.220 already and if you have any questions for me that you may have, you can always find me

00:28:10.840 on Snapchat, Instagram, Facebook or YouTube, just search my name, Patrick VidDavid and I

00:28:16.040 actually do respond back when you snap me or send me a message on Instagram.

00:28:20.680 With that being said, have a great day today, take care everybody, bye bye.

00:28:28.640 And then off.

00:28:30.820 Any time orisha felon?

00:28:31.000 The end of the day?

00:28:31.600 Tariya mama-san.

00:28:32.580 Talk to you today, it's been one for the next 3060 to 25.

00:28:33.000 Let's listen to you, everything you do the next and yeah.

00:28:34.080 And I can't wait for you to go for already.

00:28:34.720 The end of the day is where you are.

00:28:35.760 And the day you can't wait for it to listen to everybody.

00:28:46.100 Bye bye.

00:28:47.780 minha French-chat is to thank you everybody.

00:28:50.020 I say frulla for you, but I play mostly pretty much this big house and see you see.

00:28:52.080 My rapper тон hy 55, there's a horrible book or home.

00:28:53.320 That's wonderful.

00:28:54.040 It's nice to be nice.

00:28:54.980 I'm glad to be tonic.

Valuetainment - November 26, 2018

Episode 217： How To Raise Money As An Entrepreneur

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