There it is – I’ve summed up the entirety of this post. Raising capital when you’re a smaller co (under $10m) becomes challenging, especially
Here’s the Real Update:
I’ve emailed around 60 VC firms, “maybe” from 3- all RBIC funds, the rest didn’t respond or said we will “sit on the sideline” which means no.
Why can’t it be easier? (Because if where everyone would fucking do it. )
So as I’m pulling financials / recasting numbers/ putting together data rooms it made think about the alternatives. If you want to grow you need cash – Your own cash flow is only going to let you grow within those limits. So what are the alternatives?
Crowdfunding – We tried a campaign with Seedinvest a few years ago, no success beside the 25k we put in to fuel the campaign. Why Someone suggested that Seed invest was more a platform and didn’t have a highly engaged investor group that backed deals. They wanted to manage your raise, and take a % of it but you actually marketing of the raise. Could be true.. but either way it failed. Here’s the video we ran :
Have been contacted buy startengine – Looking into possibly trying this 1 more time.
Raising Capital is hard and it can take some time if you’re starting cold. Here’s some of the ways we’ve funded the business and growth internally and the lessons we’ve learned.
Wisdom #1 — Interest is cheaper than equity. When you’re starting out it sounds great if someone wants to give you $300k for for 50% of your business. The catch, you’re loosing a ton, but it gets you into business.
Wisdom #2 – A small piece of big pie — Bezos owns just under 5% of Amazon, yet he’s the richest guy in the world. How big is your startup idea?
Wisdom #3 – USE THE SBA.gov – its the best way to get financing that’s fair.
Ok so now back to the financing side: How did we get started? BULK beef jerky started with sweat equity and a cash out from my first a partner split . After that money came out of my own pocket and the profits the company started generating. It had a snowball effect, natural organic growth as they would call it. I had a job, ran it part time and started with low dollar amounts that grew and profit was reinvested to keep it growing.
PTG RULE #1 —
AVOID using MCA – merchant cash advance and selling of future sales. They are DANGEROUS and Scammy.
Merchant Cash Advance / Daily Paybacks – This is the most expensive % payback of cash you’ll easily be able to get. Yes its EXPENSIVE when you break it down into a APR formula, shoot -its just ugly and criminal, but when you need cash, its a way get get it.
Example.. FUNDBOX wants to loan me $5k for 2 weeks, then have a pay back $5,800 – wowwww, ouch.
Check out the calculation below – long story short the APR comes down to about 150% a year. That’s just ridiculous
THE MCA counter argument – Merchant Cash Advance / Short term loan
You can buy $5k of inventory that you know you can flip in the next 2 weeks for 10k. So, does it make sense to make $4200 – sure it does. The scary side is if you fail to make that flip and payment you’re going to regret it. If you can get approved with FUNDBOX, you’re probably better off using your credit card anyway.
Lets put it this way.. if you can avoid using these types of lenders – please do. Use this as your last resort. I’ve been there, I’ve paid my dues and my interest rates. Got back to wisdom # 3 — use the SBA
Other High Interest Lenders – When you need cash you’ll do anything right? Here’s other groups and some news behind them:
Lending Club – LendingClub is under investigation by the U.S. Department of Justice, the company said last month, and a number of its large investors have halted investments in the wake of its chief executive´s resignation.
Lendio.com — these guys are based out of Utah, anyone that’s been scammed knows FTC warning letter . This group also “franchises” its platform so there can be other high interest loan sharks out there , using a new business name.
I get it, these companies are here to make $, the premise of helping small business out is noble, there’s a huge market out there for capital –Capital is the reason all of us are in this business game in the first place. But beware — you’re going to pay for it, make sure you have a plan .
P.s. Look OUT for scammers
I’m pretty sure I have 3-5 calls or texts a day from some company offering me cash for my business. I just hang out, I don’t trust any of these people, they all want bank statements, credit pulls, etc. Then you get emails like the one below:
My name is Zach Gold, I am an underwriter with USD Funding, we are a Direct Lending company based out of Boca Raton, Florida. I received a submission in search of working business capital for Bulk Inc, from a broker, I wanted to reach out and see if we can cut out the need for a broker and work directly alongside each other.
In order for us to send your file to underwriting, where they will review the file and generate offers, options and approvals, cash or lines of credit for your company, we need the following information and documentation.
A filled out signed application.
some guy trying to sell my information
Here’s another one:
WHY BLACKSTONE IS DIFFERENT
Applying for funding for your business can be a confusing and expensive process if you go to the wrong lender. Blackstone focuses on facilitating the fastest loan decisions at the lowest rates with the least amount of hassle. The Blackstone team is equipped with the best financial technology in alternative lending so that we are equipped to better serve you.
Business owners need more than just a quick funding decision and a competitive rate. Blackstone stands out from the competition by providing business owners a relationship they can depend on now and into the future.
FUNDING THROUGH BLACKSTONE
Simplified Lending Process
Fastest Turnaround Time
Low Time In Business Requirements
No Collateral Requirements
An industry-changing process that leverages technology to provide you with the capital you need to run your business, swiftly and efficiently.
A TRADITIONAL BANK LOAN
Troublesome Lending Process
4-6 Weeks Average Funding Time
At Least 3 Years of Business Operation
Nixon Ruben <email@example.com>
Notice the email “viper” – exactly, scum coming from some email address.
Let me recap the responses: “No, Not a fit, to early, maybe in the future” . The list is small and growing each week, the end goal is to have something lined up for Q1 2022. Also note, I’m spending a good amount of time reading through the groups website, following up on linked in and trying to make sure there is a fit. Some groups are more tech focused, but since we are heavy in ecommerce there is a crossover.
This are actual response’s from a few VC groups:
Thanks for reaching out and your interest in ________ Ventures. Unfortunately, what you are building is not a fit for us at this time.
Best of luck as you continue to progress.
Starbucks talked to 217 investor groups that told him no. But this reponse looks pretty automated — “hi there” ..
Thanks for reaching out. I read through your deck and congratulations on the progress you’ve made to date bootstrapped.
We don’t have a strong focus right now on the CPG category and plan to step back from this opportunity. I would reach out to Springdale Ventures, who does have a CPG focus.
Best of luck with the raise,
At least I was emailed a response. !
We had a chance to review the materials and discuss with the team this morning. We like you guys and the model, but you are too early stage for us at this point (your projected 2021 revenue is right at the entry point for size of business for us). We’d like to stay in touch and as you scale consider a future funding opportunity. Please let me know if you have any questions or need further detail.
Happy Friday world — Its the end of week 2 of investor reach outs and here’s whats happening:
Advantage Cap — they might be in if I can find a matching VC for $3m
Midwest Growth Partners – They are diving into the deck and evaluating
Blue Highway is in for 2022 if I can prove the plan – they want to do an equity deal vs a convertible note.
Pretty good start – this week has been tight on the reach outs and follow up due to other commitments, but its slowly happening. Next weeks goal is to get the deck in front of another 20+ cpg groups.
I have a meeting setup up next week with another RBIC – Azalea Capital, they mentioned they are looking for $1m in Ebitda, I’m not there yet, but have a few acquisitions that can make that happen rather quickly.
I’ll check in next week with further updates, but so far so good.
Oh yah, another day of researching reading, getting sucked down vc articles and other rabbit holes, talking with team members, building career paths, researching the future of food / meat products, looking at brands that are on a growth path, comparing, seeing how we can own it all or just carve out our space and fit in. And don’t forget about snacking – you must snack when in in front of the computer.
Other fun things I had the pleasure of doing today
Favorite thought today: I was thinking about the Sketchers business model – find the leaders, copy them, sell it for 1/2. It’s proved to work with their $5b in annual sales.
VC groups contacted today:
Cavu Ventures – I Linked in Rohan Oza (Shark Tank, Coca Cola) and gave him a quick pitch, I called the santa monica # and left a vm. These guys are invsted in thrive market/ sold off chefs cut jerky and have a pretty shiny portfolio with products I see in the stores locally. Do they need a “BULK” brand that can take every product and own the supply chain with? Maybe –
Silverton Partners – this group looks more tech focused, but it looks like they invest in a wide group – lets see if the bulk platform for world domination fits their agenda.
Live Oak – Austin based VC – they invest in texas based companies -(Johnson City ! ) I also reached out to Krishna on linked in with the follow up request. I’m like a pitbull, and you’re my chew toy. I’m going to get you. (a conversation is what I’m aiming for)
Halen Brands They invested in chefs cut, I bet they lost on that one. They have a small office, but are right up our profile investor alley. Let’s see if they get back to me.
Other notes: Midnight Ventures in Austin accepted my Linkd in request.. whatttt — they must be writing a check right now. Lol – I wish .
BANK Financing news: currently working with Texas First National Bank on refinancing the plant in Johnson city, rolling over all the debt into 1 nice payment and improving cashflow. Slow as a snail, but I’m at the mercy of the bank. (this is a reason why we need more $ – hard to grow 100% a year when you’re hands are tied behind your back.)
These are primarily Austin based VC’s and have a focus on CPG. Looking through each of their websites there’s a fit. Let’s see if our deck can attract some attention.
In follow up today Karin from Blue Highway gave me “no” for now. I feel that if I pressed this and came back to her with a plan I could swing this into a yes. For the time being I’m going to let it sit as I see how the week unfolds.
The last VC webinar I was on said raising capital will be the hardest thing you will do and it will take up all your time. Based on the results from this week I’m feeling optimistic, but I know there is long journey ahead of us.
We had good conversations with Karin, John and Damon. Next steps are having their internal teams review the deck and get back to us if they would like to dive further.
Good question right? Are you getting playacted, ignored – politely declined? You want to know WHY did you get a no or a pass .. or at least I do , I want to figure out what I missed and how to make my presentation better .
Keep reading below and see if you can help me out.
Here’s the VC criteria :
So I’m following up from this weeks round of contacts. I had an email chain with an investment group and the response I had was “outside our focus as of now” …
So here’s my question; based on the focus of the VC and our focus I think it’s a match worth looking at. So why did I get this response?
Thanks for reaching out. Unfortunately this is a bit outside our focus as of now. Good Plans though Please keep us posted
I followed up up with a question about the deck and if there was anyone in their network that would be a better fit. response :
I think deck was on track – although I’d add historical financials not just current year and projected. Not sure on other investors. BULK is early for most of the folks I am thinking of – but will advise if anything comes to mind.
So back to the question “do investors really look at your deck?”
My goal here is to tweak the presentation so all information is front and center, I get it people are busy, they are constantly sent decks, have a short attention span, for the information that gets in front of them. I followed up with a 3rd question, no response yet but I’ll keep you posted.
If you would like to take a look at the pitch deck we’ve built – send me an email and I can get you copy.
So this is week 1 day 2 of a capital raise for BULK — everything you need in bulk . This should be simple right?
Here’s the progress so far:
Contacted the following investors: Advantage Capital Agribusiness Partners, LP – Had a good conversation with Damon, on the other note when I emailed one of the other partners – Keith Freedman – I was blocked . See the image below, not sure what I did wrong or if there’s an etiquette I failed to follow, or if was some automated block.