On the Menu: Financing Your Company's Growth

I want to welcome everybody to today's on the menu um and just thank yall all for coming um we've got a great topic um

funding your business um and the different options and uh I am very excited with all of youall to be here my name is Cassandra Bennett and I am the

programs manager for Research Triangle foundation and I help manage programs here at front here as well as at at boxyard so two very different types of

programs um for our Zoom Community y'all are muted um but as we've got questions don't or as you have questions don't hesitate to put them in the chat and um

today I want to introduce uh Jonathan Collins he is the director of the small business uh Center at Durham Tech he is a dedicated Mentor um for to

entrepreneurs at all um in all PL phases of their business uh he works with local groups to organi and organizations to lend his knowhow in building operating

and selling businesses uh to help those launching their own Enterprises he is passionate about his work in entrepreneurial support um and he does that through relationships with

a FirstLight Venture Center the North Carolina small business technology Development Center Echo E3 Durham and

launch Chapel Hill um our speaker uh John he is he's built his presentation to have questions at the end of each section um and so we'll if you'll you

won't have to hold your questions for long just long enough um for the zoom Community like I said go ahead and put them in the chat as you have them and we'll ask them um but other than that

I'll get out of the way you're not here to see me John please take it away thank you very much excuse me uh so as Cassandra mentioned o we lost the

clicker get it back let's see there we go all right uh my name is Jonathan Collins uh real quick some background on me so you're not just

sitting here thinking who is this guy um as it took me a while to get to this level of being director at the Small Business Center at dermtech so I'm Canadian originally my family moved down here to North Carolina in the late 90s I

grew up in Chapel Hill graduate of Chapel Hill High Tigers uh I was that kid that didn't want to stay and access all of the great educational opportunities that we have here uh so

went back to Canada to Queens University uh in Kingston Ontario um after that I was kind of bouncing around trying to figure out what I wanted to do with my life that

typical postgrad was 2008 recession was in full swing there weren't any jobs um so I ended up actually going to South Korea to teach English for a year uh to kind of find myself and figure out what

I really wanted to do my major had had been in film and media studies um which normally would have been a great track Canada had a thriving film industry uh but 2008 when the dollar kind of

collapsed and it was no longer cheaper for American Productions to come up to Canada the whole industry kind of fell apart so was left with this very much what am I

doing um and so while I was in Korea realized I had a passion for food I really loved cooking I loved being in the kitchen uh so when I returned to North Carolina I started pursuing a career in Food Service working in

kitchens trying to understand those business models and in 2012 uh was given the opportunity to purchase a local bagel shop in Chapel Hill uh I was 25 at the time and thought what's the worst

that could happen it's just a bagel shop um and it had been in existence for about 12 years prior to us taking over it had really fallen into disrepair so my partner and I came in uh to really

rehab the business to bring it back to life um that included doing a complete Rebrand the the existing brand that had been there was really tarnished and we

were trying to drum up some more enthusiasm for the business um but it just wasn't happening we got a lot of feedback that people had had just such negative experiences with the old brand

that they weren't willing to give us another shot um so we had to rename the business we rebranded everything and things really started to pick up uh around 2015 we decided Durham was still

kind of in the early stages of its Renaissance at the time so we thought hey this could be a really great opportunity for us um we found a location right across the street from city hall right downtown at the time

again there were no real really good like Quick Service breakfast and lunch places so we saw a really significant opportunity to take advantage of that market and we were able to do some fundraising which we're going to talk

about here today um and we opened our second store in 2015 uh fast forward a couple years towards the end of 2018 my business partner came to me and said that she was

done she didn't want to do the business anymore um that was a huge shock that kind of came out of the blue for me so I had minor panic attack pulled myself together got up off the floor and said

you know what you can do this uh and really looked at how I could restructure the business uh to operate it as a sole owner um that involved bringing in New

Management staff we really had both retail operations we also had a thriving wholesale business and we were look looking at building out arcade business so it was kind of like running four

businesses all by myself and I needed help for that um so brought in some good help was able to restructure things uh but towards uh I think it was around

this time actually in in 2018 I was up visiting some family in Canada and literally as soon as I crossed the border my phone was blowing up this person's calling out we can't get the store open this is happening this is and I just kind of threw up my hands and

said I'm done I can't even take a couple days off at the holidays to visit family uh and so when I returned I decided that I wanted to sell the businesses I still to this day think that something whatever

you believe in whatever I believe in out in the universe was really looking out for me because we were able to sell both about halfway through 2019 and then we all know what happened come early 20120

um so I got out just in time um from there that's when I started to look at you know what can I do with this experience I had a lot of

experience building a business um and as I was looking at applying to more kind of traditional career paths that experience was getting lost I I consider myself a generalist I can do a lot of

things pretty well I'm not an expert at any one thing um and that's when I found this entrepreneurial support Community this group of people that either have

that experience as entrepreneurs or uh there typically it's we're either on our way up in our careers or on our way out in our careers so it's a lot of people that have had that big corporate experience and are really committed to

helping the next generation of Entre entrepreneurs be successful um I started volunteering with an organization called the helas foundation here in Durham they work primarily with um necessity-driven

entrepreneurs so those folks that maybe had interactions with the justice system or have kids and can't afford child care and so traditional employment is not really a pathway for them so

entrepreneurship was presented as a hey maybe this is a way to get you and your family to bring home a living wage um recently they merged with another organization they go by the name of echo NC now now um they do a lot of Youth

Focus programming they're a great organization they just celebrated their oneye anniversary actually so I encourage you to check them out um and then through a couple jumps around I

worked at the sbtdc small business and technology Development Center uh during the pandemic worked over at First Flight Venture Center one of the oldest entrepreneurial support organizations

here in the uh in the park uh and have been at durm tech for about two years now um and again I just really love what I do being able to sit down with an entrepreneur and talk to them about what

it is that they are trying to accomplish with their business whether that's aspiring entrepreneurs maybe they just have an idea and don't even know how to start and really develop it into something solid or existing

entrepreneurs maybe they're at the end of their business journey and are looking at an exit or trying to sell their business um and helping them just make sure that everything is winding down properly and then kind of all stops

in between So today we're going to be talking about funding for your business and I'm going to preface all of this with we only have an hour so it's not going to be super

comprehensive um I'm going to try and give you a g a good overview of what the options are and how to best prepare for those options as you look at getting

some money for your business um so the first point that I want to bring up is you need to have a goal right it's really important to know where where are

you trying to take your business because that even in this conversation of funding it's easy to say I need money but as you'll see there are a lot of different options of what form that can

take and so you need to be aware of what you're trying to do how much you're trying to raise um and how you're going to fund that

growth you want to make sure that you're using financing that is matching your goals so if you're looking at some long-term growth it's going to be probably a long-term funding operation

that you're going to be partnering with if you just need need a little bit of capital to purchase a new piece of equipment um or you know I would say in the $10,000 or less range there are going to be some better short-term funding options for you and we're not

really going to talk about those a lot today we're going to be looking more at that kind of investment and long-term funding for your growth

um so funding types there are a lot of different ones out there I racked my brain and these were the main six that I

came up with um as really viable options for funding again a little note on this right now is not a great time to be fundraising it's a very difficult

landscape out there interest rates are through the roof lenders are really gun-shy right now so even more so some of the stuff we're going to talk about at the end of the presentation in terms

of how to prepare to approach these types of funding options you really need to be airtight in your projections in your business plan in your pitch whatever it is you to make sure that you

are addressing any potential concern that a fun is going to have because they are not wanting to lend money right now so in terms of the funding types we're going to talk about today first

one friends and family um pretty straightforward we'll dive into it a little bit better crowdfunding has become increasingly popular and there's more options becoming available in terms of how you can approach that

crowdfunding uh bank loans and other bank or cdfi products that you could use um grants because everybody wants free money who doesn't uh and then private or

Angel investment and lastly some venture capital and again it really comes down to one what is your business and which of these is going to be the best option for you a lot of venture capital

pathways are not going to be available for a lot of businesses um they're really only interested in that high growth sector that they can get a quick Roi return on investment and exit make

lots of money off of you and then move on to the next thing if you're looking at that slow steady growth and you're more concerned if you're opening a restaurant or what are typically

referred to as a lifestyle business bank loans or crowdfunding and friends and family are probably going to be your best bet so again knowing your business can really help you understand which of these Pathways is going to be best as

you start pursuing them uh so I'm going to try and make this a little interactive today so we're going to start with friends and family and I just kind of want to put it to the room what do you think some of the pro

of getting funding from friends and family are yeah I well is that a pro or a con okay okay already have social

capital perfect Social Capital yep perfect y less formal yeah yeah those are

all very good Pros so you've got a warm audience I realized I should have split this into two but uh so you got a warm audience you're probably going to get some more favorable forgiveness if if

you if your business goes under if you're not able to pay that money back you know your family's not going to come after you for everything you own um you're probably going to get better than market rate interest if you have good

relationships with your friends and family if you've got a really shrewd Uncle he might really push you and get you at market rate but you never know and generally speaking it's going to be debt financing does everybody know the

difference between debt and Equity we're going to talk about that a little bit today okay so um yeah so friends and family money is typically going to be debt usually they aren't going to want

to become co-owners in your business and ask for an equity stake unless they see huge potential for themselves and that's where they're wanting to come in cons as you can see here it's not always

available right you might not have those people in your network you might not come from that background where your family has this kind of money to invest

um I put that guilt as a right my mom's Jewish so I am no stranger to guilt uh but it can really weigh heavy on you when you're trying to run your business

when I when we were raising funds for our second location we did it all through friends and family and that first year it was like carrying an elephant on my back the stress of not

wanting to let these people down they had put their faith in me they had invested in me in my business and that potential for failure was really causing me a lot of

anxiety and it wasn't until I had a conversation with my sister that she said listen these people did not in invest their life savings with you they all wanted to support you if you fail

it's not the end of the world but it took me a long time to come to that realization um so that can really affect how you are able to run your business if you're so concerned about keeping your

investors happy especially if they're friends and family uh so just something to keep in your mind potential deterioration of the relationship some

money when it comes to between friends and family can cause a lot of issues especially if it goes poorly so you might be putting that relationship at risk if you aren't able to deliver on

what you promised uh and again kind of tied with the guilt I said there's typically lots of strings you know your shrewd uncle has 10 million ideas on what you can be

doing better for your business and you want to you know provide him that place to listen but you might not actually be willing to take that

advice does anyone have any questions around friends and family funding again this one's probably the most straightforward yeah the like what are the advantages of

it or I would say probably earlier on as you're a younger business and some of these other avenues probably aren't as accessible like a bank loan you do need to have some business history before

they'll even consider you same with Venture Capital some of these more established formalized areas in funding friends and family could be a great way

to get that startup funding um it could also be if you really are kind of debt averse and you don't want to uh put yourself on the line with a traditional

bank loan um if your credit score isn't great um and those more traditional routs aren't available for you this might be one of the only options that is available

yeah yeah so for any of these there will need to be some contracts involved I think especially with friends and family you want to make sure you have everything very clearly laid out and

written out um so that there is you can try and avoid that potential deterior of the relationship um definitely want to get a lawyer on board you want to make sure that everything is clearly written

out in terms of what the interest rate is what the payback schedule is it's gonna it's G to act like the same as the other Capital opportunities that you could pursue it's just you're doing it

with the warmer audience and I think that's where some people get in trouble is they think oh I'm just borrowing this money from my mom I don't need to have a contract with her but you do you definitely

do any other questions okay all right so moving on to crowdfunding is everyone familiar with

crowdfunding yes sir so I want to make sure I'm understanding if they want to be like an equity partner a shareholder in the business

but they don't have money they have money but you right so yeah so that's a a really interesting

point and we're going to touch on that a little bit later in the presentation because it's it does come up with a lot of these funding opportunities when you're looking at Equity investment um but generally speaking you need to have

something some skin in the game personally whether you are just the idea person um or you are bringing a skill set that only you can provide to the business you are still the driving force

behind the business and so if they are just providing the funding then you want to be really careful with how much power you are giving them ideally as the the

founder you are retaining at least 51% um but depending on what's on the table that might not necessarily be a great option for you

um and you kind of have to make that decision personally in terms of how much you're willing to give up to be able to advance the business

all right crowdfunding so who here has ever supported a crowdfunding

campaign one two three couple of y'all um and what made you choose to support whatever it was that you

supported for me it was something I started project like a product project that I just thought was a really cool idea that

yeah yeah and I think better H betters yeah um so crowdfunding has become increasingly popular because you as the

business owner retain a lot of control in this funding scenario right you can one set how much you're trying to raise generally speaking this is going to be a

better option if you're not looking for a lot of money it's going to be a lot harder to raise $100,000 on a crowd funding platform than the 25 to 50 range

even that can be a really challenging number to reach on a crowdfunding platform um so who has some thoughts on what some of the other Pros for

crowdfunding would be yeah um while you're you know trying to raise moneyer than yourself to an audience yeah that's a good one y for

valid excellent anyone else all right and what do you think some of the cons might be I already listed one that the amount can be very

hard to achieve yeah a lot of like different people's expectations it doesn't work out as

either they area or sideway all right um so yeah I think we touched on a lot of these Pros right it you're reaching your customers and potential customers directly generally speaking if

you're on Kickstarter and somebody supports your project there's a good chance that they're also going to then become a customer of the business um depending on which platform you use you

may not have to pay that money back it acts like a grant um it gives you an opportunity to creatively tell your story to to focus

on that marketing piece um to really present a vision for your business that is going to appeal directly to the customer and not necessarily to a banker sitting on the other side of the

desk uh and you can really tap into a global audience you can send it out all over the world it is accessible to anyone all over the world to be able to support your business idea some of the

cons I also put marketing there because to run a successful crowdfunding campaign does require a full-time marketing effort you can't just put it up on Kickstarter and expect that people

are going to organically find it you really need to be that driving force banging that drum saying hey go support my campaign hey go support my campaign hey we're gonna do this I need you to

support my campaign and depending on how long of a Runway you give yourself for that campaign it can really eat up a lot of your bandwidth trying to make sure that people are going and supporting you

another con you might not be able to raise the full amount and depending on which platform you use some of them are all or nothing if you don't hit that Target you don't get any of

it so and so I put Indiegogo up first because they don't do that they are actually good about whatever you do raise you get to keep um they do take a cut of your fundraising so it's important when you're setting that

fundraising goal to understand how much the platform is going to keep and make sure you're compensating for that generally it's around 10% of the the funds raised um Kickstarter is an All or

Nothing platform if you don't hit your goal you have to give all that money back um another con it's a really crowded space again kind of tied into that Global activation there are

companies and startup businesses all over the world that are fighting for those same eyeballs and those same dollars so you have to make sure that your campaign really stands out in a way

that is going to draw in those potential donors um and then also you have to come up with a reward structure a lot of them because a lot of them are basically

grants uh you need to give something back to your investors depending on their investment level uh and generally the platforms will have some sort of guidance in terms of what makes a good

reward um we tried our hand at a an Indiegogo campaign when we were raising funds for our second store I think we had four or five different donation levels and it ranged from you know a

free cup of coffee to free bagels for life if you you know donated $5,000 or more uh we didn't get any of those so again making sure that whatever

you set as those donation levels there is a a commensurate reward opportunity for them that they can kind of see the value in what they're getting Beyond just that warm fuzzy feeling of

supporting a business all right next very traditional bank or cdfi loans and other products cdfi for those who don't know stands for

community development financial institutions um they are much more rooted in community they are great options for startup businesses um whereas Banks typically

you need to be in business for at least two years you need to have documentation to show that you have been in business for two years specific Financial documentation either tax returns or two

years of profit and loss or balance sheets um so even if you're in the very early stages of your business and know that you are going to be pursuing Bank funding down the line start your

recordkeeping as soon as possible make sure that you are keeping track of those financials so that you can take them to a bank and say hey here's my two years that you're looking for um you know

we've seen significant growth in those two years they are really going to be looking at the numbers so what do we think some of the pros of a bank loan

are pry good yeah typically it's a pretty solid bet if you have everything you need sorry R tap that yeah that's a con

there's typically a lot of red tapes yes sir yeah and so that's really a good point and I'm that's where I put kind of bank and cdfi on there because typically when we're working with clients we work with a lot of people that are are just

starting their businesses and don't even have a business bank account yet so when we're referring clients to go pick a bank that's one of the pieces of advice I give them think about how are you

going to be able to develop your relationship with your Banker you might not need money right now but you may in the future and you want to make sure that that relationship is going to give you a better opportunity to receive that

funding typically the larger corporate Banks the Wells Fargos the Bank of America those big ones that are more uh they care more about satisfying their

their shareholders and keeping their bottom lines tight they that relationship with that Banker is not going to carry you as far so if you have the opportunity I definitely recommend

working with a credit union they are responsible to their members um not all credit unions offer Business Services but a lot of them are starting to um so definitely thinking about credit unions

or even local or more Regional Banks um those relationships that you are able to develop will take you a lot further when you're working with somebody that is more rooted in your community um you

might have a great relationship with Wells Fargo and your local Banker but the thing is when you submit that loan application you become a number in the system whatever relationship you may have with the person at your local

branch they're still kicking up your application to a corporate underwriter and all of that kind of gets squashed down um so some other Pros generally speaking it's going to be a secured and

fixed interest rate you won't have a lot of control over what that interest rate is that is typically governed by whatever is going on more broadly in the economy again right now not a great time

to be borrowing money interest rates are very high so it's very expensive to borrow this way um again you can develop a strong relationship with your banking partner and that relationship can

hopefully carry you a little bit further um so if your financials aren't as strong but they they know that you are really committed to the business uh and that this money is going to help you achieve something great for the business

that might help push you over the line between approval and denial uh typically they have a variety of different loan products available it's it's never going to be a one-size

fits-all situation so depending again on what the funding need is and how long you're looking to space out that financing um they may have different

products that are better suited to what you're trying to do again if you're looking at some short-term capital needs or um really just looking for a little bit of operating Capital to keep some

business going while there might be a cash flow shortage or something like that they may even offer you like a business credit card or a revolving line of credit that might not necessarily need to be a Term Loan that is fixed

interest rate and paid back over a fixed amount of time they'll have some flexibility in how they can work with you and again banks are typically going to go for debt financing they're not interested in taking a stake in your

business they're just going to loan you the money and expect that they're going to get their return based on the interest that they're charging you some of the cons you don't mess with the banks they

will get their money one way or another so uh very strict payback so you want to make sure as you're looking at submitting an application for a loan

that you are appropriately looking at what does your debt service look like in your financials how much are you taking on and what is that going to do in terms of your monthly cash flow how much are you going to be required to pay back

each month um and making sure that your business can absorb that additional cost uh you may have to put a personal guarantee or some personal collateral up

to secure that loan I was recently working with a client we were trying to get her uh some funding to open a new restaurant and all looked great for a while and

then the numbers started to creep up and then it all all of a sudden switched that she was going to have to put her home up as collateral and that was something that she really wasn't ready

to do the numbers were solid but just she wasn't ready to take that leap and say I'm gonna put my entire life basically at risk for this business um

especially when there's a personal guarantee even if you have an LLC or something like that to kind of protect your personal assets by signing that personal guarantee they can still come

after you personally so just be aware of what you're signing when you're signing it uh and again that risk of foreclosure and seizure of assets so if you do default on that loan and you did put up

some collateral the bank can come after that so just be very careful make sure you understand everything that is being laid out for you uh and try and avoid

putting yourself into a overly risky situation there's always going to be risk involved in business investing but you want to make sure that you are setting yourself up for Success sorry I realized I didn't stop

for questions after crowdfunding were there any questions about crowdfunding Andor bank loans you find there are certain businesses that tend to be better at crowd funding than

others um yes and no it does seem a little random the ones that I've seen that have been wildly successful uh there's a new

bagel shop I keep coming back to that example but they did a Kickstarter and I think they were only trying to raise 30,000 and they raised 60 so I don't think they were expecting it to be that successful but they had been at the

farmers market they had lots of community support they did a good job marketing it and were able to raise more than what they were hoping for um I think it really again comes down to that

marketing and how you're putting out the message of what you're doing and at a certain point it does kind of hit that inflection point of the work that you're doing then kind of gets picked up by the

algorithm and the algorithm will start pushing it up as a better project to support um so having a little understanding of how the platforms work

as well in terms of boosting your project could be beneficial and there are people that Focus specifically on helping you build these crowdfunding

campaigns um one of the in Colo is actually a local community um they are they do crowdfunding with investors with private investors it's not necessarily

an open to the public funding option um and they do a really good job of preparing their entrepreneurs for to be in that room with those investors so that when investors say yes I am ready

to support you everything is very streamlined and ready to go yes sir h i Wasing let's say you're the business is very very sucessful You'

like to thank all your CR is it possible or can they you know keep it Anonymous or is it already anous I think some platforms will allow you to donate anonymously if you don't if you

don't care about the reward you don't necessarily need the recognition or anything like that and you just want to support them from the Shadows absolutely that is I I think a lot of them will allow for

that any questions on bank or cdfi funding you look like you had I do probably more like like my the business I'm May

talking about real estate what I found with the banks is like [Music] um okay yeah we'll save it for the

end all right grants as you can see I chose a unicorn for this slide because I think a lot of people view grants as

Bountiful and readily available and why wouldn't you go for Grant GRS but in reality again depending on your business and what you're trying to do

grants can be incredibly rare they can be incredibly competitive they can be really hard to access if you don't know how to go through that process so who

can think of there's a pretty big obvious Pro to Grants free money

yeah right who doesn't want free money what are some of the other ones yeah you have to sck to the

you yeah more yeah more on the con side but yeah there's very strong parameters as to what you can

do anyone else Pros or cons yeah deliverables reporting Yeah well yeah free with

strings a lot of yeah yeah it takes a lot of work to maintain right instead of an investor or a bank loan where it's just they give you the money you pay them back every

month it's you gotta talk about what you're doing with the funds you got to submit those reports you've got to submit the financial reports to show that you're spending it as they were

intended to spend it um another one of the pros if you're doing something really spe specific you can probably find a grant program that is going to fund you to do

that very specific work especially if you're in a science or Tech field the federal government is releasing new grants pretty much every week um sbirs

STS again those are very competitive but if you and what your business is trying to do fits within the parameters of what they're trying to do from a federal government perspective you could be a

really great candidate for one of those programs and there are some really great resources that can help you develop a strong application to go after those

Federal grant programs on that yeah so um first plight Venture Center where I used to work they run a program called Fast every year which is

the um Federal instate technology I think is what it stands for um but it's basically like an accelerator cohort to give you that background understanding of what it takes to submit a successful

Grant application and then from that program I think they select some of the more promising uh companies from there and they will actually pair you with a consultant who will help you prepare

that application um Eva Garland Consulting is the name of her business um and she has an incredibly High success rate uh yeah if you're looking

to go there privately she's not cheap but uh she does have a very good track record in helping companies access these federal grants um beyond that the sbtdc

also has some good fund uh some good Support options for the SB and sttr grants they have an entire team of professionals across the state uh that are just dedicated to helping

entrepreneurs access these uh Federal grant programs yeah uh and then some of the cons that we talked about right the reporting all those strings that you got

to follow uh they're incredibly rare they're incredibly competitive uh and if you don't use all the money you got to give it back so

just again be aware of what you're pursuing what the the reporting qualifications are if you or somebody in your organization doesn't have that skill set you might look at hiring

somebody that's their sole job is to make sure that this grant is being deployed and managed properly um just to make sure that you are staying in compliance last thing you want is for them to have to claw back that money

that you've already earmarked for spending and then they say well you're not doing what we said you could do with that money so we're going to take it back and generally speaking if you do need to hire staff you can build that

into your proposal to say we're going to hire a person at this salary to help us manage this program all right private and Angel investment what do we think are some of

the pros here it's gonna overlap a little bit with the friends and family but generally speaking these were were outside of our immediate Network

now maybe this is a friend of a friend or somebody that we've come in contact with that's interested in what you're doing but you don't have that strong relationship with

them yeah I have been suful for a couple years but I think I've remember um when it comes to private and Angel investment usually it's people who have knowledge

of the business for their great resources whenever you know they have an interest in you in your company so they

want you to thrive um so they have those resources in the knowledge so that can be a great asset for your business absolutely I think that's probably one of the best assets of this type of

funding is that you could really bring somebody that has some of that industry experience that you might be lacking to make sure that you are getting that really specific support that you may

need to grow yeah building on that once you raise money investment easier to next round because you already have yep

you've got credibility somebody has already bought into your idea it's not just your Aunt Sally that had a couple thousand dollars lying around it's somebody with that business sense that has really taken the time to look over

your financials to understand your business and they still see potential in it so yeah that's a great

one what about some cons or yeah sorry because money business yeah so flexibility and how you can deploy that funding that's a that's

a really great one generally speaking they're going to be more supportive of anything that is going to be viewed as helping to grow the business whether that's facilities whether it's Staffing

whatever it is yeah in the back there they might pressure yep yep I think I put that more in the VC category but yes for private

investment it can happen as well um so yeah hit on a lot of these right a flexible structure right you can really try and negotiate the terms of

that investment um that might be debt or Equity financing depending on who the partner is they might want to join you and become a partner in the business and

again you want to be careful with how much equity you are giving up for the sake of getting some funding because at the end of the day it's still your business and you want to make sure that

you are retaining that control that 51% ownership so if somebody comes in with a really aggressive offer and says I want to you know give you $2 million make

sure you understand what they're expecting in return they might say well your business is only valued at x amount so this 2 million really gives me more equity in the business than what you've

put in so far so I think I should be the majority owner you want to be really careful with those negotiations get a lawyer get an accountant so that you fully understand what is being proposed

and what you're agreeing to um typically private and Angel investment there's a bit of a slower Roi return on investment depending on who

the partner is they may be trying to pressure you for a a quicker return but if they are buying into the business if they are becoming Equity Partners chances are they understand that that means that it's going to take a little

bit more time for them to get their money back out if they are doing it through debt then again they get their money back through the interest rate that you're paying them um so again

understanding what it is that you are setting up with these private investors um and like we said earlier you have a potential partner to help you grow the business they might bring a skill set

that you're lacking or in need of some of the cons again might not always be available depending on H the size of your network and who is in that Network you might not have those connections to

get you in front of some private investors or Angel groups um you might have to give up Equity they might not be interested in just loaning you the money they might want that Equity investment

to make sure that the return that they're getting is in line with what they're trying to do um they might have higher Roi expectations they might be

okay with it taking a longer time but if that's the case they might want a 10x or a 20x exit if it's going to take them that long they might not be okay with a 5x or or a

smaller return uh and it might be unsecured generally speaking Angel groups will have a good vetting process for their investors but again if you're just you

know meeting with a friend of a friend who says yeah I've got $50,000 to invest you want to have that contractual agreement so that it's all written down on paper but there are still some uh

opportunities that an unsecured uh investment like that could come back to bite you sorry any questions on

yeah yeah so like uh if something were to happen to that investor personally maybe they you know have a bad day at the stock market and they come to you and say well I want you know I'm fine

not getting my Roa but I need my investment back there would probably be something in your contract about what that looks like but maybe your business doesn't have

the cash on hand to be able to pay that money back right away so again making sure that whatever is in that contractual agreement gives you that Runway should they come back and say I

need my money back out of this business that you have some opportunities and and um mechanisms to be able to afford doing that all right and Venture

Capital uh uh so we're running short on time so I'm going to kind of blow through this one um some pros of venture capital again kind of like private investment um

depending on the VC firm you might get a lot of active support from the firm in terms of them helping you scale up and grow your business some firms are very Hands-On some are very hands off and

they just say here's the money we expect this five or 10x return in 5 to 10 years uh off you go let us know how it's going they'll do quarterly check-ins or

whatever um generally speaking this is going to be funding for rapid growth right this is a huge infusion of capital into your business so that you can scale

up to a level of being profitable making sure that this money is is going towards that growth and that higher Roi to increase the value of your company so

that they when they sell their Equity stake are getting that big return uh also this this is where you're going to get access to really high levels of funding potentially um bank

loans they're going to cap out depending on how solid and established your business is you're probably not going to be able to get a ton of money depending on what your goals are venture capital

is really the way to get that massive infusion of capital uh some of the cons again highly competitive uh you need to be able to deliver a really large return on investment they're not going to be

interested if you say well if you give me this money and in five years I'm only going to double it that's not going to be of interest to them they're looking at a 5x or higher return uh generally it's viewed as a

pretty Cutthroat industry right if it's it's all about the numbers it's all about the money they don't necessarily care about you and uh the business itself they just want to know that that

return is forthcoming uh they're almost always going to take some Equity that's how they get their money back by increasing the value of the business and then their

shares become worth more uh and it's an incredibly volatile landscape sometimes whether there's an impending recession kind of like right now a lot of VCS are

similar to the banks very gun-shy uh really wanting to make sure that any businesses that they're investing in are again airtight and gonna put forward that high

Roi um so now that you know kind of all the different types of fundings that are available how do you actually go about and get it get it right um so number one really understand how much money you

need how much are you trying to raise that's going to be the number one question for any of these sources if you need $500,000 you also need to have a clear

understanding of what that $500,000 is going to do for your business have a clear breakdown of the use of funds don't just say well we're going to put $220,000 towards marketing what does

that mean right they want to know what is your strategy how are you going to deploy those marketing dollars is it a social media paid ad campaign is it a billboard on the side of the highway you

need to be specific with that use of funds and then you're also going to need a business plan or a pitch deck depending on which of these funding sources you're going through um again

what the gentleman back here brought up you should always be the first source of investment in your business you should have some sort of skin in the game on the books as owner Equity even if that's

just the money that you put in to get the business started your startup costs the filing fees for your corporation um any startup Capital that you used originally uh maybe you just put you

know $2,000 $5,000 into your business bank account to get it established you need to have some skin in the game before anyone will take you seriously did you have a question back there oh

sorry I thought I saw you raising your hand um no one will want to invest in your business if you haven't invested in it first so on a business plan um and we at

the Small Business Center have a great resource that we use with our clients uh called live plan it's an online business plan writing template it breaks it down into very easy manageable sections it's

got an AI helper tool so that if you feel like your language is failing you you can just have the AI come in and dress it up and put it into fancy business e language um but your business

plan is what tells the story of your business to these potential investors it's an opportunity for you to sell your vision right so you again want to be

really specific wherever possible great business plan you're going to have all of these sections and various levels of detail in them um your executive summary you always want to write that last because it's a summary you can't

summarize what you haven't written yet uh a general description of the business what is the problem that you're solving what is the solution that you're putting forward what are your products and

services what is your pricing strategy uh looking at a marketing analysis and a uh market analysis and your marketing plan what is the size of the market that you're trying to go into is there

opportunity for growth there looking at your competitors that may already be in the market how much of a market share do they have how are you going to put forth a solution that's going to be unique and

different from what they already have or that may already be in existence um your operational plan are you going to be uh just you in an office by yourself or you going to have a whole

team of folks that what is the breakdown of responsibility how do you keep the wheels of your business turning your management and organizational description uh again

especially when you're looking at bank loans uh they want to know that you have the experience and the knowledge of the industry that you're trying to set your

business up in um again this restaurant client that I was working with we met with a lender the biggest concern my client had she's been working in a food

packaged good business that's the foundation for business uh she's been doing a lot of catering but she'd never run a restaurant before and so that was a big concern on the lender side is that's great that you have food service

experience but you have you don't have specific restaurant experience and it's a very different thing so if you don't have those skills if you're trying to go into an industry where you don't necessarily have that background you

want to make sure that there is somebody on your team that is bringing that industry experience um and then last but probably

most importantly your financials uh projections if you have Financial history that you can show if you can show those trends of growth uh

in your revenue and keeping your costs either flat or looking at how you can Implement some cost-saving measures um and then your projections need to be based on solid

assumptions so you can't you know a lot of clients will come and say well how do I write business projections and the truth is you make them up right but they need to be based on something you can't just pull them out of thin air and say

yeah I'm going to make $10 million in my first year okay but how right so again in the example of a restaurant client you know what is your average ticket per customer how much is the average

customer going to spend how many customers a day do you think you can serve what does that extrapolate out to from one day to a week to a month to a full year is there any seasonality in

your business are there going to be any Hills and Valleys in your cash flow throughout the year really think about it critically in terms of the reality of what it's going to look like in your

business and again those needs how are you what are the needs that the business has um and a clear breakdown of how you're going to use the funds and then if you need them any additional exhibits

or appendices that might help support the story that you're telling in the business plan uh so yeah business plan writing can feel very overwhelming but uh you

know how do you eat an elephant one bite at a time right so just take time to plan out your strategy take it on bit by bit it can be really hard to as the

business owner go from writing your marketing plan section to then switching to the financials right it's different parts of your brain so give yourself the time and the bandwidth to really focus on each section and make sure that you

are putting as much relevant information as you can in there to write the most compelling story that is going to make a funer want to support you um you don't have to do it on your own

there are great resources like the Small Business Center like the small business and technology Development Center sbtdc uh lot of different entrepreneurial support organizations around the triangle we are very lucky to

have a robust network of people that are willing to help you with this um talk directly to the lender or the funding organization that you're you're going to seek that funding from

see what specific information they may want from you in that application or in that bus plan so that you can address

any concerns before they pop up um when you're looking at VCS and we're going to talk about pitches really quick after this um but when you're looking at VCS look at their portfolio companies what

kind of businesses are they already supporting private investment again this restaurant client that we were working with she had the opportunity to meet with an investor but he had never invested in restaurants

before so he didn't really know what to expect if he gave gave her that funding he was looking at it more as like a potential biotech company and expecting

a quick Roi restaurants very slim margins very tight margins very low profitability so it is a much longer term investment that you're looking at but know who you're getting into bed

with before you sign anything if they don't have that industry experience that you're needing chances are they're not going to be a great funding partner for you you can do this little for there uh

so a pitch deck really quick so like a business plan the pitch deck allows you to tell the story of the business but you will actually be there telling that story it's not on paper um so a great

pitch deck you're going to include your problem and solution how did you arrive at this solution a little bit of that uh origin story of the idea uh you want to

have a clear description of your product and service you want to again provide that market analysis what is the market size how much of that market do you think you can capture any traction that

you've been able to establish to date uh again VC is not going to be looking for brand new companies they're going to want to see something a little bit more established they want to see that there

is some validation already in existence for your idea um and make sure that there is something there before they put any money in uh again really strong

competitive analysis who are the competitors what makes you different how are you going to stand out operational plan management and organizational description and again the typically more

so on a pitch you're going to want to focus on those projections and you're going to have to distill them down into just the relevant information they aren't going to necessarily want you

know your two-year pnls uh in a pitch they want to see what is the growth trajectory what are you expecting to do in the next five 10 years and then finally an ask right what is the point

of the pitch you're asking for something uh and depending on who you're pitching to and what the point of the pitch is it's probably going to be money but it might also be you're pitching and asking

for connections you might need somebody to join your team that can bring some Financial skills or a marketing person and so you want to make sure that there is a clear ask at the end of your pitch

so that when you walk out of the room they know what exactly it is that they can do to support you tips for a strong pitch deck know your audience again VC

it's going to be all about the numbers focus on that don't spend a lot of time on the marketing plan uh and the kind of softer sides of your business when they really just care about what is the

bottom line um focus on visual storytelling I did not do a good job of that with this presentation there's a lot of words in my slides you want to

focus on what a a clear image that will resonate with the people in the room um the the pitch deck should be a

support for you telling that story it shouldn't be the entire presentation uh should be a guide not a novel look at me getting ahead of myself use your slides efficiently depending on

how much time they give you you probably if it's you know a five to 10 minute pitch you probably don't need more than eight slides and that's probably even being generous it's probably closer to five or six so again you really need to

be tight with the information you're presenting and keeping it to just what is most compelling about your business uh craft multiple versions for

different purposes again maybe you have a 5 to 10 minute version maybe you have a 20-minute version and that can allow you to have some extra slides in there that can give you some space to provide

some more of that uh supplemental information keep it on brand make sure that they know that this pitch deck belongs to your business if you hadn't haven't developed your brand yet do that

before doing any of this have a logo understand what your colors and fonts are they should know that this deck belongs to you and practice practice practice last thing they want to see is somebody getting up in front of them

that's stuttering or doesn't know their answers or they ask a question and you can't give them a great direct response

back you need to be crisp and clear and concise you can do this and that is all y so we are right on time um if you need to head out

please don't hesitate um our next on the menu is January 18th and it is rethinking presentations um so if you're working on a

pitch great topic great followup all right so now I'll hand it back to yes I am available I am around for Q&A we can definitely yeah need leave yes where

[Music] you to retire just like your rest

so want to make sure so seller if if they're offering to hold on to their stake and then slowly transfer ownership over or

[Music] yeah yeah so seller financing I would kind of put in the grant category it's typically a a bit of a unicorn um but if

that is an option that's on the table it's definitely worth exploring I would treat that more kind of like the private Angel investment um because it's not necessarily somebody that is really tight in your network you're basically

putting your faith in a stranger and I think again you really want to focus on what are they holding on to is it just essentially that they are loaning you the money and transfer full ownership

over to you at the start of the agreement or is it that they retain ownership and then bit by bit with every payment you are acre more equity in the business and that slowly transfers over

to you because if that's the case if they're holding on to a lot of that Equity then they still have essentially full control of the business so it's not

really your until you have that 51% yeah salary considerations I mean I still think back to on Sharp tank when Mark ke said to I want the money I want

somebody who is willing to eat ramen noodle for a while I'm not willing to do that at least not the pre kind for a while but I also want to know any tips

for to be taken seriously with what you put in a salary for yourself would it be the market value or is it more of what's the level that you're set based on how

much you can hold out for that big profer yeah so generally speaking there is a very soft metric for that where when somebody's reviewing their

financials they want you to have a reasonable owner salary what is reasonable depends on person to person but I think as long as in those financials you can show whatever you are

saying that you are you want to pay yourself fits into the financial model that you're presenting and you can still be profitable that's great that's the ideal the

investor may say well we think that your salary is unreasonable we need you to work for less just in maybe the first two years so there will probably be some negotiation on that again depending on

who the funer is yes ma'am referenced an online business plan writing program um but I didn't hear with yeah it's uh it's

called live plan live plan yeah Li Ive pln um it's actually a company that's based in Raleigh that uh administers the

software um but it's a a really great really robust tool yes sir um so I mentioned earlier so um I'm I'm going the real estate

market and so I run into a case of where like you said like if you don't have much St game you're not really GNA get on money so I sort of found run about ways like friends and family Network St like

that now I'm going I've had my first purchase um on payre lead for like four months um so I'm waiting for some other loans to open up but in that meantime

like I know a big thing they talk about is um I guess it would go into I don't know if it's vent your capital or um if it would be considered private name but you know you have um

people that Essen will you know Grant you yeah Capital how do you go about vetting those nor legit because sometimes they like okay well you gotta

you know put up yeah so there is actually like a a qualified investor certification um so I would ask anybody that's interested if they have that

typically Angel groups will require that of their members um but it's kind of up to you right you kind of have to treat it like a job interview like do you

think that this private investor is really going to be committed for the amount of time that you're looking for that investment to stay in the business or are they looking for a way to kind of

get rich quick um you you need to do your due diligence on them just as much as they are going to do their due diligence on you uh making sure that they again do they have any real estate

investing experience um another option there there are um trying to remember what the acronym stands for but REITs real estate invest

investment trusts um which could take some of the pressure off because all that money that you are collecting from that investment goes into a trust so it

is very much secure um a lot of the big property developers around the triangle like uh Alexandria is a Reit they basically have a lot of investors that say we give our money to Alexandria and

trust that they are going to properly invest in properties yeah absolutely I I think Cassandra has it and she'll send it out to the guest list yeah no worries

yeah I realized I didn't even do a plug for my Center so uh in all of this so we yeah yes so um our services are all

prepaid by your tax dollars we are state funded so we are a free service for any entrepreneurs in durman Orange County if you're in Wake County you can access Wake Tech we are part of a Statewide

Network every Community College has a small business center um so I definitely encourage you to reach out um you can visit our website durhamtech.edu

SBC like small business center um and there you'll see the sign up for counseling form um it's just a brief intake form that asks you some basic questions about your business uh you can also sign up for our newsletter that's

where we're putting out information about our programs that we offer uh as well as any new funding opportunities that we get alerted to um and then we do also do educational programs similar to

this usually I'm not the one presenting we'll bring in subject matter experts uh to give 90 minute toour presentations on specific topics um so we have some scheduled out what's great about being

part of this network is there might be something going on at the Asheville Center that they're hosting online that you can still access so definitely encourage you to check out that program website