Metro Startup Launcher

Metro Startup Launcher

How to Get Capital for Your Startup

November 26, 2018

What's the most effective way to raise capital for your startup?

How do most companies actually raise capital for their startup in our area?

What changes in SEC law have made it easier to reach a lot more investors?

What's the best way for YOUR startup to raise capital?

In this video and podcast, Alan Grosheider, Director of Metro Startup Launcher, recaps his recent speech at Venture Connectors to discuss all of the above and more.

Transcript Below (Machine transcribed, so please forgive the typos.)

Hey everybody, it's Alan Grosheider with Metro Startup Launcher in this video and we'll also put it out as a podcast on how to get capital for your startup. I'm recapping a speech that I gave recently to venture connectors and in the speech I talked about what seems to be working and not working for raising capital for your startup in our area and some of the law changes that allow you to be more public about raising capital for your startup and what I would recommend that you do. So first let me ask you if you think it's a good idea to raise capital from lots of small investors to get your company started. Well, let me give you a couple examples of companies that have done that and had been very successful with it. The first I witnessed myself when I was going to college, I would come home in the summertimes and workout at a gym in Southern Indiana and at that gym there was a guy who would walk around asking people to invest in his company and he was asking for five or $10,000 and talked to a guy, another guy one time who was pointing in mountain talking about it and said, this guy's crazy.

He walks around the gym every time he's here and he's trying to get people to invest in his company and he thinks he's going to build this big national company and it's going to compete with pizza hut and little caesars and dominoes. So I think you can probably guess who I'm talking about: Papa John. Everybody's heard the story about him selling his Camaro so he could buy an oven and put the oven in his dad's bar and get his company started. But what they haven't heard is he also raised capital from fairly small investors in a number of fairly small investors in the area to get the company started. And of course now he is the first Forbes 400 billionaire in the Louisville area. So the point is small investors can definitely lead to big success. I'll give you another example. My company, it was called ESA1 in 1994.

I was 25 years old and I found for investors to put $6,000 each into my company and I started this company that was going to be a nationwide environmental inspection company. We then ended up, I ended up putting an $85,000 on credit cards and I definitely would not recommend that to anybody. But from there we raised $350,000 from 52 to individual investors. And then finally $3,000,000 from a venture capital firm. From there we built the company to include operations in all 50 states with employees in 30 different cities around the country. So again, small investors can definitely lead to big success. So how do you do it? If you want to raise capital for your startup, the classic way I'll call it this, is the way that most companies still raise capital around here and probably the most common way that's raised around the United States. You start with an idea and then you form your corporation and you create a business plan.

Then you get your friends and family to invest in. Hopefully you've got some friends and family who are willing to put some money in that. If you're lucky, you find a lead investor and the lead investor knows how to set up all of these things. They set up your help. You set up your Cap Table and your valuation and shareholder agreement. All of the different pieces that you need in order to successfully raise more capital and then the lead inve...