Other People's Money Montrose CO

You’ve likely heard the adage, “it takes money to make money.” While this is generally true, most business and real estate entrepreneurs will tell you it doesn’t always take your money to make money.

The idea of leveraging “other people’s money,” also known as OPM, has become extremely popular in the post dot-com world. From single purchases of real estate to multi-billion dollar private equity purchases, leveraging the money of others has become a distinct part of our financial culture.

If you are a person of vision who can create value in a business, real estate or any other type of investment transaction, the opportunities are truly limitless, regardless of whether you have the funds to do the transaction on your own. But raising funds from outside sources can be tricky. The Securities and Exchange Commission (SEC) has regulations that both protect and restrict average investors.

Potential funding sources range from banks and credit cards to friends and family to angel investors and venture capital funds. With so many avenues, it can be difficult for an investor to decide where to start.

Find your message

The first step in raising capital is to identify “what your story is and how well you can articulate your story,” Dave Parker, CEO and founder of 9SPACES, Inc., who has successfully raised millions of dollars for his own companies and others, said.

Angel investor Scott Greenburg, who invested with Starbucks and T-Mobile in their early stages, said the first thing he looks for in an angel investment is a message and a messenger.

Many entrepreneurs get caught up in the details and have trouble seeing the big picture; an advisory board can help simplify the message and turn it “into a story that you can communicate in a way that other people can repeat it,” Parker said.

Legal counsel is another crucial component to the initial team, Parker said. He recommended asking around to find out which attorneys are great at helping startups raise money.

It is worth the time and dollars spent to find the right attorney, Parker said. “It’s not going to be cheap to put together, for example, a private placement document or a pitch book, but getting their perspective just to help you even craft the message is incredibly valuable.”

An attorney can help determine which structure makes the most sense for the project or company. That structure needs to be in place before investors will fund the venture, Parker said. “You can talk to as many investors as you want, but until you have some of those things in place, like incorporating, no one will write you a check.”

Entrepreneurs should know whether the project will become a lifestyle business or a business they will sell, Parker said. Careful analysis of the market and projections for margins should be completed before approaching investors, and it should be clear that it is a company and not just a product being pitched, he said.

Specific documents to prepare include a bu...

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