Episode Transcript
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Speaker 1 (00:00):
Hey Money Movers, Welcome back to Money Moves, the daily
podcast determined to give you the key to the Kingdom
of financial stability, wealth and abundance. Hey Money Movers, Welcome
(00:20):
back to the Money Moves podcast powered by Greenwood. We
are talking business Moves today, Business Moves with our favorite
business lawyer, Asha Wilkinson. Ashow, Welcome to the podcast. Thank you.
I'm happy to be here. So entrepreneurship is a topic
that comes up often on the podcast because in our
community we have so many different levels of entrepreneurs from
(00:44):
hospitality industry to technology to high growth, scalable businesses, and
we want to make sure that everyone is armed with
the right information to succeed. And today's topic, I think
is incredibly relevant because we're always hearing about this idea
of raising capital and fundraising and understanding when to go
out and raise capital. So I want to ask you
(01:07):
if you can share with us five major points to
ask before you take on an investor. Absolutely, And I'll
just start by saying that a lot of people want money,
but some of y'all ain't ready to take on the
Oh my gosh, say that again. This is gonna be
my favorite segment, right we want money, but we're not
always ready to take on that money, right, So the
(01:29):
first question I want you to ask is really, what
do you want out of this transaction? And are you
ready to receive it? So you need a plan for
if someone's going to give you money. They want to
know that you've been working already, that you're likely to succeed,
and they want to know exactly what you're going to
do with the money that they put into your business.
So what is it that you want? You just want
(01:51):
you know. And this is like I want to pause
you right there, because I think what's happened is in
the world like entrepreneurship, startups, technology, everyone's talking about raising money.
Everyone is also talking about and without question, there is
a huge disparity in the amount of funding that goes
to black and female entrepreneurs. It's less than two and
(02:13):
that statistic is predominantly in the tech world. But it
also makes a lot of people go, well, where I
need to raise money? And so I think, like, if
we back out of this, the question again to your point,
is like who needs to raise money when and why?
And what type of money you know? And so like
this is this is these are the conversations that we
need to have right now so that we have an
(02:34):
understanding of like does this apply to me? Um? So,
what type of businesses are you seeing that are going
out and actively in need of raising money? Yeah, so
a lot of tech businesses, of course we hear about
that all the time. But there are other companies that
I work with, like retail companies. And the key is
is you're scaling up right, It's not. There are some
(02:55):
groups that are going to give you money to get
your business off the ground, but those are more local,
grassroots organization. When you're talking about really raising money, it's
because you have tested an idea, put it to market,
and now you need more capital to make it bigger,
to make that significant jump to scale, you know. And Hasha,
(03:16):
thank you for saying that, because it's not just like
I got a lot of people who are like, I
have an idea, I would like to give you a
whole lot of money so that I can work on
my idea and right I can be an entrepreneur on
a beach like all those people that just look like
entrepreneurship is super easy, Like that is not how it goes.
No only on Instagram, but on Instagram totally. I mean
(03:36):
think about it. If your little nephew or little niece
asked you for some money because they're working on a project,
you were going to be ten times more likely to
give them the money. If they've shown you what they
have done so far, I can show you where the
gap is. They need some more paint, some more glue,
some more tools. Right, think of yourself, is that little
niece or nephew that is working really hard on this
project it needs a little bit of help to get
(03:59):
to the next level. Yes, Yes, And I think one
of the things that is really important to understand is
the type of money you're getting. So you mentioned, um,
you know, oftentimes there's some local organizations that are supportive
in terms of helping you to maybe take small business
loans to buy real estate or you know, cover the
rent on a property and you go to a small
business loan and that's a small loan and you'll pay
(04:20):
it back. The other side is when you're hearing these
people who are getting ten million dollars in funding to
build a high growth, scalable company. And again what that
means is if you're going to take ten million dollars
of venture capital you need to pay that back to
the tune of about ten x the return. This is
not about philanthropy where I'm giving you money to just
(04:42):
you know, hopefully you'll just build your dream. You need
be able to prove that you will pay this money back.
It's a very detailed outline of this business transaction of
how you're going to be able to make those investors
their money back at ten x twenty x. I'll take
It's okay, right, and you're right, it's not free. So
(05:03):
I think the next question to ask is what are
you willing to give up? Right? You? Because because the
venture capitalists aren't just giving you money and letting you
take it to the next level, they're going to if
I'm giving you ten million dollars. If I'm giving you
ten dollars, I probably want to know that I'm going
to have a little bit of influence because I have
some skill that I bring to the table. And so
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you have to really think about before you take on
that money. What are you willing to give up? Are
you willing to give up some control? Are you willing
to allow this investor to do the marketing or to
do whatever it is that they have their expertise in
Are you willing to give up a percentage of your company?
If it's an equity investment, what are you actually willing
to give up? Because if you haven't done it yet,
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the chances of you just getting the money and being
able to run with it solo are slim to none.
You know, it's like very likely. So what is the exchange?
What is the money worth to you, not just in
monetary value, but in terms of time, mentorship, commitment, things
like that, and this what are you willing to give up?
Question is a lot deeper because with that will come
(06:09):
information on what type of term sheet you're getting getting,
what are the conditions to which the loan money is offered,
how much equity you're going to give up? Are you
giving up board seats to people who will then have
input and be able to help vote on how your
company can grow and scale and make critical decisions like
there is a price to be paid here. So it's
definitely something that you want to do your research on
(06:31):
and understand down to the last little detail what you
are giving up when you are taking outside capital or
investment from other people. Absolutely, So then the next question
is do you really need to get an equity investment
or can you just borrow the money through more radial
routes right, whether it's through a bank or maybe some
(06:52):
friends who are just going to give you a traditional
type of loan where instead of giving up a piece
of ownership in your company, you have agreed to pay
it back at some kind of interest rate. So, you know,
equity could be great, it's not free. Alone could also
be great, also not free, but the stakes are probably
a little bit lower on just a traditional loan than
(07:14):
on an equity investment. So that's a good question to
ask yourself, you know. And there's also a lot of
different organizations that help get you access to capital in
different ways. If you have something, you know, if you
have a restaurant, you have real estate, you can take
loans against that because it's an asset um. If you
are you know, have a product or something and you
(07:36):
need to raise money to buy more products, sometimes you
can get loans that is based upon that. So there's
just different debt equity loans as opposed to the traditional
venture capital route. And I say this because oftentimes I
think people get really discouraged because they are barking up
the wrong trees when they're looking for capital and they're
getting no, no, no, And so you know, take the
time to really research your business and your industry to
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make sure that you're looking for capital in the right places.
It'll save you a lot of time, it will save
you a lot of ego, and it will save you
a lot of nose along the way. Right, absolutely, and
ask them why they said no, because it's an opportunity
to go back and refine what your pitches, refine something
in your business. You know, maybe it's it's a no today,
but that's useful information so tomorrow could be a yes. Yep. Um.
(08:23):
I do a lot of angel investing myself into like
early stage seed rounds as well. And you know, just
for my philosophy, I like revenue. I like companies that
have shown me revenue they've proven, um that there are
customers willing to pay for it. You know, there's other
people who were like pre revenue. They don't care. They're like, hey,
if I like your ideal, I'll buy into it. So
you you can sort of learn a lot from asking
(08:46):
these folks these conversations and save yourself a lot of
heartbreak as well. The next question to ask is how
long will this relationship last? You know how like who
is the person? And we're probably asking ourselves in a
lot of situations, but is this person or this group right?
And how long do I actually want to be tied
(09:06):
to them? So how long you know, do I want?
If it's equity, it's going to be a much longer relationship,
maybe forever than if it's a traditional loan. So that
is something that's important to consider, especially if you don't
get along very well, and you probably won't go into
business with someone you don't get along with, But if
you know that they've got some skill and you kind
of needed third party and intermediary to help you work
(09:28):
with that, that's something you should consider before you sign
yourself up with money and a contract to work absolute
person or this group for a long period of time. Yeah. Absolutely,
you know, something you said in there really resonated with me,
and it was this idea like getting along with investors
or people that are going to be intimately involved in
your business. And you know, this happens in sort of
(09:50):
two ways, Like oftentimes you'll see people who who bring
on advisors and they give them a little chunk of
the company. It could be either point five percent could
be more depends on the terms. But you know you
want there's other ways to add value to your company,
And I think you need to be very cognizant of
what these people will bring to the table because it
is a long relationship. You know, it is a lot
(10:12):
of a quickie. It's not a one night stand. We're
not talking about tinder here. This is like a morrange.
So you want to make sure that you get married
to the right people that can help you achieve your goals.
So in particular, when you're taking money from other people,
whether it's friends and family, look for people who have
expertise in the area that you're building. So if you're
(10:33):
building something that is you know, in telecom or on
phones or something like that, go after people who have
worked for twenty years at a T and T or
something and they can offer you really great advice and mentorship.
And at that point, you know, you might have to
offer them a point um in your company so that
it's worth their time. But it it'll it'll it'll really
help and pay off in the long run. Absolutely, And
(10:56):
try not to duplicate things, right, Like if I brought
someone into my those who's exactly like me. Well, now
we're still reaching the same audience, we have the same
skill set, We're not growing right. So it is much
as sometimes it's uncomfortable to say, well I don't really
know something about this area. I need help in this area.
That's exactly where you want to bring people onto your team,
because then you are expanding the expertise of the business
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and the reach of the business. If you duplicate, you
just duplicate, right. You don't want to duplicate. You want
to you know, grow exponentially by reaching different people in
different areas with different skill sets. Um. You know, this
actually just makes me think of some other things. You know,
we've seen a lot of this influencer marketing right now,
where you know, people are building companies and they need eyeballs,
they need attention on their product, and they know that
(11:41):
you know, based on the name or the brand of influencers,
they can get ahead and hopefully drive eyeballs to their product. Um,
that's an interesting thing. And I think again, Asha, with
your expertise of contracts in this where it's so important.
You know, if you're going after an influencer to get
things in writing, you are going to do this moving forward,
(12:02):
whether it's on a monthly basis, um, so it can
really be outlined and they can you know, I think
it becomes very clear on both people's sides what the
expectation of what the deliberables are. Absolutely, and the more
people you bring onto your team, you know, you have
to think about the reputation of the people that you're
working with, right, and we all have our lives as individuals,
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and so how does that reflect on the company. And
that's not saying don't do it, it's just saying, be
really choosy. Be just as choosy with your marketing partners
and influences influencers as you are with people you're taking
money from, because you have to continue to work with them,
and you all are a reflection of each other. So
make sure it's at the level that you wanted to
be at. Absolutely. I love that alright. What else in
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addition to money, have we missed anything else we talked about,
you know, influencers being able to bring eyeballs perhaps different markets. Um,
what are other things that investors bring to the table
that we should pay attention to. Yeah, it's really about
opening the door and being able to get you, you know,
out of your present situation into the next level, and
a lot of that requires some humility, you know, because
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they have a different experience. They've been where you are
trying to go. So it does take a little bit
to say, Okay, I've got this idea, I've built it
this far, but now I need to humble myself and
take on the expertise in addition to these dollars. But
take on the expertise. So folks and you know, take
what's true and leave the rest right, but keep keep
working together, keep building, and eventually you'll get to where
(13:29):
you're trying to go. Yeah, I love that, Asha, This
was really great. You know, I think these are a
lot of questions that people need to know before they
decide to take on an investor, before you're giving up
a little piece of your baby, your company, um, and
you need to really approach it from a very well
versed standpoint. So I appreciate you having uh your two
(13:49):
cents on here and your legal view as to what's
important before you take on an investor. Asha, thank you
so much for helping us today with business moves here
on the Money Moves podcast. And can you let our
audience know where they can reach you and find you
on social media. Of course, come hang out with me
on Instagram. Osha Wilkerson e s Q Alright, Money Movers.
(14:09):
That's all the time we have her today, but make
sure you follow Asha on all of her social media handles,
and make sure to tune in Monday through Friday and
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(14:31):
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