So you need capital financing and you know there are risks involved. So you are concerned. Will this work for me? The reality is simple:
Ask yourself how you plan to obtain customers for your business or project assuming it is in fact funded and actually launches operations.
If your answer is that you plan to use some form of advertising, then this begs the question of whether or not you have a legitimate business opportunity that a prospective investor could be interested enough in to make an investment. All of business requires risk-taking and relies upon Large Number Theory playing out constantly in the market. You cannot make the argument that you are unwilling to take calculated risks to fund your business but require the investors to take those very same risks you refuse to accept. People who practice this failed logic are automatically doomed to be part of the more than 4 out of 5 companies that fail to obtain capital financing on a routine basis.
Making The Numbers/Risk Calculation…
The risk calculation is a simple one that you can assess for yourself. Every Rainmaker Capital Markets Program licensee who undertakes a private placement securities offering pursuant to the Rule 506(c) exemption, will be requiring a minimum investment of at least $100,000 per subscriber. Each of these subscribers have to be qualified accredited investors. That being said, imagine you are presenting your investment opportunity (i.e.: your private placement offering) to these qualified, accredited investors. Now, ask yourself how many of these investors would have to be present in order for you to successfully sell one (1) subscription for at least $100,000. If the answer is greater than 50, then your probably don’t have a sustainable value proposition to obtain capital financing from any funding source and you should immediately stop what you are doing. If your answer is less than 50, then you probably have a value proposition that, all other things being equal, is sustainable in the capital markets, and your job becomes proving it is sustainable to a reasonably-conservative third-party using independent evidence that substantiates your claims.
To summarize, you can ask one (1) investor (or lender) to provide capital financing and you will receive either one (1) “yes” or one (1) “no” answer. Experienced entrepreneurs know that soliciting that single investor (or lender) takes time and money. Negotiations can take months and each particular investor (or lender) has their own business model requirements which may not work for you, but does work for them. On the other hand, you can offer a value proposition to 20,000 prospective investors all at once and get 20,000 “yes” or “no” answers. The critical differences are the overall cost, the time spent and the certainty of success. All of these differences are, more or less, controllable outcomes while soliciting a single investor or lender has a very low potential for outcome control.
Large Number Theory tells us if we flip a coin enough times eventually the number of coin flips for both heads and tails will be equal. All businesses operating in market economies function because Large Number Theory works in their favor. You have the opportunity to make it work for your business.
Please choose wisely and honestly.