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This episode is a business coaching session on raising capital and obtaining the money you need to start a business.

Results-Focused Training, Tools, and Workshops from Expert Business Coaches.

Featured Coaching Excerpt - Notes & Transcript, Part 1
  • Action Step: If you go with the credit card method, call your credit card company every three months and ask them to double your credit line increase.
  • Editor's Note: Compare credit cards and credit card offers at CreditCards.com
  • 14 Ways to Get Capital: 5. The Venture Capital Method
  • Editor's Note: If you have any additional questions email us today at info@Thrive15.com.

[MUSIC PLAYING] 

 

-So, for business coaching clarification, you're saying you use one card, you make a big purchase. You wait six months usually?

-Well--

-In this method?

-If you go onto creditcards.com--

-Creditcards.com.

---you can find the cards that have no balance transfers.

-OK.

-And they don't talk about this at college because I don't understand what they're teaching there, but they should be teaching this. But a no balance transfer fee, what it means is you can transfer the payment, the amount of money you owe, from one card to the other. Business coaching tip: So the key is you want to get your credit score up high.

Well how do you get your credit score high? What you need to do is you need to have-- there's a thing called a Chase Freedom Card, and a Chase Freedom Card is basically anybody on the planet almost can qualify for that. And get yourself a cellphone bill. If you're young entrepreneur, get it in your own name, pay your utility bills.

Now here's the real talk. If you don't pay your utilities on time, do you know it hurts your credit score? If you have all your cards maxed out, do you know it hurts your credit score? Business coaching advice: So what you're going to want to do is you're going to want to have credit cards where you never spend more than about 50% of the limit, and you pay them off every single month.

-Got it.

-But what's awesome is you'll call them about every three months and say-- again, this is a process-- but every three months just call your credit card company, and say, hey, I would like to request a credit line increase. And they say how much? You say I'd like to double it. And then the dude puts it in the machine, boop boop boop. He says you're approved, and all of a sudden you now have $2,000.

So let's just say you have 10 dudes working in a company. Say it's a startup.

-Right.

-Or three dudes, all right? So if you guys are trying to raise money, what you do is you all go on creditcards.com.

-Yeah.

You all apply for a card.

-OK, business coaching time. You get a no balance transfer fee card, and you go up there, and then you each get like a $2,000 limit. Spend. Buy it all. And then have a second card already that you already have, and once you get time where you owe money on it, transfer the balance from one card to the next. And then make sure you never get caught where you have a balance due and you don't have any money.

-Right.

-But you should have a business model. I knew that no matter what, I was going to pay it off.

-Right.

-Because just that's how I roll. Now if you're somebody like, well, I might-- I might pay it off, well then, don't do it. But this is a great and very, very valid method, and Sara Blakely, who started the billion dollar company Spanx, did this.

-Hmm.

-People that-- I know three guys who-- very, very successful millionaires who actually own home building companies, started their companies with this.

-I love it.

-So this is the move when you want to start a business.

-I love it. It's very practical business coaching advice. All right, so tell me about the pros and cons of this credit card method, then.

-The pros is that you can use the balance transfer to move money over in the credit cards fast. You know why? Because you're dealing with a non-government entity. Sweet! So what you do is you apply. They tell you right now, no, you're not accepted. Yes, you are. You get a card sent to you overnight, 24 hours. 24 hours later, dude, you are spending money.

-Right.

-Bam, that's sick! So I got this awesome MasterCard. It's a Silver. It's called a Silver card. That beast, I get some cash back on that, so I'm going to take my wife on a trip to Miami, all paid for with my rewards points. Not a dollar out of pocket. Super cool.

-A lot of your Christmas gifts.

-For free! Yeah, so I do that, that's cool, right? For free. That's nice. So it's fast. You get cash back rewards. You can transfer money. It's great, great, great.

Bad deal. Here's the cons.

-Bad deal.

-If you do not pay the payment in full each month, your interest will be so sky high, you will believe that you are in Colorado at the top of some mountainous resort smoking pot.

-Wow!

-Yes.

That's super high.

-That's high.

[WIND BLOWING]

 

-OK. Well that's good. That's a good warning, pros and cons there.

-Very high.

Business coaching for method number five, the venture capital method for raising capital.

-Sure.

-This is something you've been doing most recently, I believe. Talk just a little bit about this.

-I have done venture capital to raise money for other people in the past. Not on the scale that we're doing for Thrive because Thrive's designed to be a global, worldwide overhaul of entrepreneurial education. But I have done venture capital on a smaller scale. I think a lot of people, they read venture capital, they say Silicon Valley?

Um, true. There's only about between 400 and 600 active, meaning companies that actually lend the money on a consistent basis, through what they call institutional investments. So it's like a company that actually lends money. That's what they do.

-That's what they do.

-They have analysts who analyze every deal. They look at every deal. Very few, only between 400 and 600 of those. So that's what venture capital is usually people are referring to when they think about it.

-Right.

-But venture capital could also be somebody who's crazy enough to invest in your business or believes in it enough to put money in it, and it's not secured. You're putting money in, but it's not guaranteed by, like when you lend someone a house, you're not lending money to someone to buy a house. You're not that crazy because you're saying I will lend you money to buy this house. If you do not pay for the house back, I'll take the house.

-Right.

Learn how to start a business on Thrive15.com with mentors like Clay Clark

Featured Coaching Excerpt - Notes & Transcript, Part 2
  • Definition Magician: Venture Capital Funding - This type of funding includes venture capital from professionally managed funds that have between $25 million and $1 billion to invest in emerging growth companies. - Entrepreneur.com
  • Recommended Reading: The Startup Game: Inside the Partnership Between Venture Capitalists and Entrepreneurs - Bill Draper
  • Ask Yourself: What networks do I have at my disposal that can help me raise capital?
  • 14 Ways to Get Capital: 6. The Family and Friends Method
  • Action Step: Google the SEC and do some research, you may have to deal with them in your future.

[MUSIC PLAYING]

 

-In my business coaching mind, student loans are the craziest venture capital ever. Because you're lending money to a person who doesn't have discernible job skills, and they have no ability to pay it back. And what can you take?

-There's nothing to take.

-We'll take you back. You can't take their-- so, but venture capital is like unsecured investment dollars that people are investing in your venture. That's what that is. And I'll go ahead and read you the definition from entrepreneur.com. Venture capital funding is the type of funding that includes venture capital for professionally managed funds that have between $25 million and $1 billion to invest in emerging growth companies.

-OK, so what are some of the pros and cons of this one then?

-The pro is that if you have a high growth, high tech, high financing needs business, it could be perfect. So, I mean, if you have a company where you say, (IMITATING DR. EVIL) it could be worth a billion, then venture capital makes a lot of sense. Because the people-- if you are investing money, need to have so much of a huge upside that it's worth it.

And when people invest in venture capital-- I don't care what venture capital book you read-- there's one called "Pitching Hacks," which is good. There's one by-- a book written by Bill Draper. The name escapes me, but we can put it up on the screen. It's venture capital book, by Bill Draper.

What he talks about is that venture capital they have to believe that over half of the businesses they invest in are going to go belly up. So they better make enough money on the ones that win to make it worth it.

Now on the cons side, what's bad about it is it's hard to get. I mean, when you tell people that you're open for business and that your business is lending money. Everyone lines up.

-Right.

-So there are thousands of people trying to get venture capital and almost nobody can get an appointment. And then the people who can get an appointment, almost none of those people can close the deal. So, we have an episode that talks about how to do that. But it's very hard to get. You can do it. You can do it. Business coaching truth: But it is hard.

-All right, so let's move on to business coaching for method number 6, then.

CLAY CLARK: Come on.

-This is the family and friends method for raising capital. Talk to me a little bit about it for some business coaching.

-Well, I'm just going to read this to you. It is something I wrote earlier, but it says, "a diligent man or woman who is totally sold out to their business and knows that they simply will not stop applying effort until they win. So they feel confident asking every human they have ever met to invest in their company." That's what this is. And a lot of people-- it's weird. It's just weird. I don't get it. I do not understand. If this is you, we do not have to agree. But I just want to share this. I want to speak directly to you. If there is--

INTERVIEWER: Do it.

- --something watching this and going--

INTERVIEWER: Preach it.

-I don't know what you're saying right now. I don't understand how you could be so emotionally invested in a company that you would ask a bank to lend money, but you wouldn't ask your own family. I don't get it. Because if you're sold out to the business, why would you not feel comfortable in your uncle investing in it. I mean, you say, well, it's too risky. Well then, why would you ask a bank?

Business coaching tip: I just think it's a deal where if you're going to ask for money, I think you ask anybody. You turn over any rock you can find and look for capital there.

-And I think this is something that people don't often think about. Because they think about raising venture capital, like you just talked about-- a big company that says, yes, I'm lending out money. And they're like, I'll never qualify for that. Man, I'll never qualify. But not many people think about their network, right? And we have different networking things. This is huge. You've got to have the network where you can tap into friends and family members. And you've done a lot of that with Thrive, as well, right?

-Yeah, and we'll talk about some things. I am a very crafty individual who spends a ton of time reading.

-Yeah.

-I probably log 15 hours a week in my bathtub. Spence, one of our videographers got a chance to witness me emerging from the bathtub yesterday.

-Wow.

-He was not in the room. He was just aware that I was getting out of the bathtub.

-Oh, OK. I'm glad we clarified that.

-I want to make sure we're all on the same page.

-Would have been some counseling or something.

-Little disclaimer. But what I want to say, though, is that I think about things a lot, OK. There's a thing called the SEC, and their job is to make sure that-- it's a federal organization-- to make sure that people are not out there raising money for Ponzi schemes, things where you take money from one guy to give it to another guy, you rip people off and you-- there's a lot of regulation with raising capital. So, I have been able to structure a lot of my capital I've raised over the years as a loan where I have to pay somebody back, the company has to.

In the traditional sense of raising venture capital you have to be very careful of what you're doing and seek the guidance of an attorney. Because if you do not, I don't know if you know this, but it's federally against the law to raise more than a certain amount of money with a certain number of investors, unless you have basically permission from the SEC.

So, it usually takes about six months to get through that process if you want to raise that kind of capital. So before you get too crazy raising venture capital, just Google the SEC, find some things there, or you can watch some other Thrive business coaching episodes about venture capital.

-Good, all right, so what are some pros and cons here of the family and friends method.

-Well, the family and friends is, one, if you're tenacious and you honor your commitments, family is a great method.

-That's what we talked about earlier, if you've built up that reputation.

-Yeah, I mean, family-- if you went to 10 of your family members and asked them all to invest $1,000-- a lot of businesses are started for $10,000-- well, gosh that's a pretty good way to do it. Now the con, is that if you're not tenacious, and you're somebody who is-- you're not resilient in the face of adversity-- then you're going to quickly end relationships with these family members in a very harsh and painful way.

Featured Coaching Excerpt - Notes & Transcript, Part 3
  • Ask Yourself: Should I ask my friends and family for capital?
  • 14 Ways to Get Capital: 7. The Angel Investor Method
  • Lesson Nugget: Angel investors not only put in money, but valuable business advice and mentorship.

[MUSIC PLAYING]

 

-Business coaching story: I have a guy that I new from college who was a sloth. And he says, I'm going to move to LA. And I'm gonna start a big, big company.

And I'm saying, hey, I don't mean to rip you, but real talk-- up to this point you've been a sloth. Whatever, bro!

He's asking everybody from college to invest money. I'm going out to LA. I'm going to start this thing.

And I'm like, have you ever seen Homes wake up before 10:00 in the morning? Have you ever seen him like-- and they're like, but he's super smart. He's got a 4.0 from Oral Roberts University. This guy's going to be something.

And I'm saying, hey, I'm just telling it like-- he's never-- he's smart. But he's not tenacious.

Well, he went out there and spent every dime that people had. Never paid them back, never worked through adversity. And everyone can't stand him.

That's painful when it's your family and your friends. So just gut check. If you're watching this-- I'm not judging you-- I'm just saying if you're watching this, you need to go ahead and ask yourself, are you the kind of person who should be asking your friends and family for capital?

-Right. I feel like investors are concerned about the idea, obviously. But a big part of what they're betting on is the person.

-Absolutely. Business coaching lesson: The vast majority of what they're betting on is the team.

-Which is a big reason why anybody that's invested in Thrive wanted to get to know you or your family, and get to know what you were all about. And you know, your work ethic, all of that. That's what they're betting on.

-We had a venture capital meeting yesterday with a guy. And he was basically wanting to know about our team. Who's doing the video? Who's doing the photo? Who's building the website? Where are you from?

That matters to people more than almost anything.

-Exactly.

-So your integrity is a big thing.

-That's huge. Business coaching for method number 7 here.

-Oh, come on now.

-This is the angel investor method for raising capital. OK. So talk to me a little bit about this angel investor method.

-Yeah. Well, there was an article that was written on March 12 of 2013 by-- I can't pronounce her last name properly. It's probably Tanya Prive, or Tanya Prive, or Tanya Prive, or Tanya Prive.

-We apologize, Tanya. We apologize.

-But she appeared in Forbes magazine. And she says "The term angel investor originally comes from Broadway, where it was used when describing the people that provided financing for theatrical productions." Angel investors-- this is some more declarative for you. Angel investors invest their money where the typical amount raised is usually between $150,000 and $2 million.

And sine angel investors are often individuals that have held high up positions, executive positions, at large companies, they often provide fantastic advice and introductions to the entrepreneur, in addition to the funds. So it's a huge deal because what you have to realize here is there was a Harvard study that was done. And this Harvard report showed that companies that had secured angel financing had a much higher chance of survival then ones that did not.

-Because of that business coaching mentorship.

-Yeah. Because the person who's lending you money or investing in you is someone who's been successful. And now their coming on not as a venture capital firm, where it's a company lending you money. When you get money from a bank, they don't give you a lot of advice.

They say, you can come up to the SBA office of advocacy and learn if you want to. Uh, no thanks. Or you can talk to one of our banker representatives. He could help you.

But there are some banks, like Regent Bank, where Sean, one of our Thrive members, Sean Copeland, is the head of Regent Bank where they offer business coaching and classes for their clients to help them be successful. But very few do.

But angel investors, when they lend you money, you're not just borrowing their money. You're borrowing their mind.

-That's huge.

-How cool is that? To have a billionaire partner? That's neat.

I'll just give you an example. Reid Hoffman teamed up with Airbnb. His firm invested, but he took the role as kind of like a angel investor and business coaching mentor. And as those guys were dealing with the challenges of growing Airbnb, they could call a guy who started LinkedIn.

-That's huge.

-How cool is that?

-So that's the main difference then, I guess, with angel investing versus venture capital, is that you've got this mentor to wisdom you can draw on right there.

-Well, technically the definition is the angel is gonna be a dude who lends you money, or a lady. A human. One person.

-So venture capital cannot be a single person.

-It's usually, venture capital is normally from a big fund. So that's kind of like if you're saying, I'm raising venture capital. Usually you're talking about a fund. And then if you're doing angel investors, it's there.

-So could you technically, I guess, classify Shark Tank as an angel investment kind of setup?

-I think that Shark Tank is one of the most ridiculous and asinine concepts that's ever been presented on the planet Earth. Because people are giving 45% of their company away for someone to invest 50 grand. And why?

Just go work construction like I did. Go max out your credit cards like I did. Ask your family and friends like I did. Do anything.

But to go on Shark Tank and to be ridiculed publicly by people who are trying to put on a show for America, and then to give up 45% of your idea for $50,000. That's insane.

-But technically, that could qualify as angel investment.

-I think it could classify more like--

-I was just trying to better understand it.

-It could classify more like poop than it could like anything else. Be more like poop.

-Good. Good. This is great help. Great advice here.

-If you're going to classify, like manure and poop in that section of Lowe's where you find the recycled animal dung.

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