Sunday, April 4, 2010

Creative Financing and Cutting Edge Capital

From the Cutting Edge Capital website.

The Financing Strategies

1. Support from your biggest fans

Many entrepreneurs have found that they don’t need to borrow funds or sell equity in their companies – if they have a solid fan base, there are many ways to tap into that resource for funds. Strategies in this category include pre-selling, customer financing, crowdfunding, memberships, donations, and sponsorships. The great thing about this strategy is that securities law does not apply.

Examples

Awaken Café – pre-sold “café-creator” cards that allowed them to fund the build-out of the café and entitled buyers to purchase products once the café was open – raised over $14,000!

Little City Gardens – told its story on a crowdfunding site and solicited donations in exchange for t-shirts, stickers, newsletter subscriptions, etc. – raised over $17,000!

2. Cooperatives

Businesses that organize themselves as cooperatives of consumers, producers, or workers have a huge fundraising advantage – members put up capital to join and receive financial and other benefits in return. Member capital can be contributed in installments, making it possible for people of all income levels to invest in co-ops. Most states exempt co-op memberships from the securities registration requirements which means legal costs for raising capital for a co-op are relatively low.

Examples

Co-op Power – raised over $225,000 from community members to install renewable energy systems throughout New England

Friendly City Food Co-op – raised over $150,000 in patient capital from its members before even opening its doors!

3. Direct Private Offerings

The general rule is that you may not offer investments to the public without registering the offering with the state and federal securities regulators. However, if you only offer the investment to people with whom you already have a relationship, the offering may qualify for an exemption from the registration requirements. Cutting Edge Capital can help you structure your private offering to allow maximum flexibility within the law.

Examples

Mill Valley Beer Works – raised $105,000 from unaccredited investors very quickly and at a very low cost using a California exemption from securities registration

Equal Exchange – raised over $8 million in equity from a large number of investors that have no voting rights

4. Grants and Public-Private Partnerships

Businesses are finding more and more creative ways to partner with nonprofits and governments to raise funds. Cutting Edge Capital staff have extensive experience with these kinds of partnerships and can help its clients structure mutually beneficial relationships to fund their businesses while contributing to the greater good.

Examples

Mandela Foods Cooperative – partnered with a sister nonprofit and raised over $600,000 in grants for start up

Progressive Upholstery – partnered with a nonprofit and secured a $700,000 federal grant to create jobs for low-income community residents

5. Direct Public Offerings

A direct public offering is a way for a company to “go public” without the intermediaries that orchestrate an IPO. A company completes required offering documents and securities filings and then can sell shares directly to the public – the company’s customers and community.

Examples

Real Goods – raised over $4.5 million from its customers with an average investment of $900

Hahnemann Laboratories – raised $467,000 from 242 investors

1 comment:

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