There is no question in my mind that the Internet is the greatest resource ever invented for entrepreneurs who want to raise money from investors. Never have so many tools existed for entrepreneurs to locate investors. You can extend the premise of Chris Anderson’s famous book “The Long Tail” to include investors: for every project, every idea, no matter how unusual or niche-focused, there is somebody somewhere who will want to invest in it.
Of course, the challenge is locating the people who would want to invest in your deal through the vast noise and nearly infinite cubbyholes that make up the Internet. It is like locating a few needles in an incredibly vast haystack. Before we begin to make some sense of how you might accomplish this, let’s do a little review of basic principles:
1. Unless you have filed for and received the right to conduct a public offering, you cannot legally advertise for investors using the Internet. This is a rookie mistake that nonetheless must be repeated over and over again for people who are not familiar with securities laws. In the United States if you advertise for investors in the public domain without first complying with the securities laws requiring registration, you have broken the law. There are many ways to move beyond this that can be accomplished with some planning and perseverance. You can merge with a public shell, you can file a Direct Public Offering, you can be acquired by a public entity. Or, you can use the Internet to meet people without directly soliciting them upfront as investors. Some of these people could be converted into investors for a private offering later. These topics are well beyond the scope of this article but worth considering as options.
2. Your project should be worthy of attracting investors. I have stressed this in other articles and it bears repeating here. Most projects are not properly thought out by the entrepreneur and will be sinkholes for investment capital. Please see to it that your deal isn’t one of them.
3. You should develop compelling presentation materials. Twenty years ago, a business plan was the currency of investor presentations. Ten years ago, it became necessary to throw in a PowerPoint presentation as well. In the present, you may need a video presentation, video conferences for investors to participate in, or any number of other rich media resources. You don’t need to be a star on camera or even have good video footage to accomplish this. Many excellent presentations can be made without shooting any video at all. But, you absolutely must tell a compelling story that gets people excited about your opportunity. And, because you are going to use the Internet as a tool in your investor marketing campaign, you must take into account the loss of intimacy and personal contact that occurs when you are not physically in front of somebody.
4. In all likelihood, any investor will eventually need to meet you in person before investing. This is just common sense. You are asking somebody to trust you and your judgment in a business endeavor where they are depending on you to run your business successfully and look out for their personal interests. Business investing always has been and always will be about people and trust first, second, and third.
How the Internet can help you locate investors
Let’s assume for the moment that your project is not a public company, meaning you can’t legally put up a notice on your website that says “We need investors. Inquire within”. That being the case, your efforts should center around developing and expanding your relationships across the Internet in ways that suit your investment goals. Since you can’t advertise for investors (not even in Blog postings!), you are going to instead concentrate on meeting people and expanding your network of contacts. Once you can truly state that you have established a relationship with somebody you then open the door to offering them the opportunity to invest in your deal. This is a pre-established relationship. What is a relationship? Is it that somebody commented once on a Blog you posted and you then emailed them asking if they’d like to invest in your deal? Probably not. But, to the extent that you get to know people and engage with them around your business and who they are, you continue to move forward into really establishing a defensible relationship.
I should state here that I am NOT an attorney and nothing I am saying is intended to constitute legal advice. In fact, you are going to want to have a securities attorney in your court to advise you on the finer points of bringing in investors.
Simply put, you use the Internet for what its good at- broadening your network of social contacts. You use social networks, websites, Blogs, and all of the other available tools to constantly meet new people who could develop into potential investors for your deal. You find inroads into industry discussions, people of common interests with your project, social media groups, on and on. You use them to build your own personal “book” of potential investors. You develop relationships with the best of these prospects, meeting them in person where you can. Any you will eventually find that you have enough interested prospects to fund your deal. Of course, if you have a public company, you can bypass several of these steps and directly solicit qualified investors according to the restrictions of your offering.
Sound simple? It’s not. There are many legal finesse points as well as high-level presentation and marketing techniques involved. But, there has never been anything like the Internet for capital raising in the history of mankind. I’ve been involved with raising money for deals for over twenty years. Boy, do I wish the Internet had existed in the early days of the Pacific Venture Club when we had to schlep to every meeting in the Bay Area in order to meet people. I could have saved myself some shoe leather and tired feet.
Robert Coleman is the President of the Pacific Venture Club, www.pacificventureclub.com. You can reach him at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .
Copyright 2009 Robert Coleman ALL RIGHTS RESERVED
