Forums: Discussions for entrepreneurs and small business.

I just finished reading the book Guerilla Financing.  It`s a very good book but a bit old (1991).  In one section dedicated to angel investors, the author asserts that it is illegal to advertise for investors or silent partners and that it`s only legal to advertise for general active partners.

His suggested work around is to "consult" with your angel investors once a week or so...thus making them "general active partners," but in practice they`re really still silent partners.

Is this true? I see classified ads all over the Internet for investors. 

Yes, it is illegal.  Check out Reg. D.

http://www.sec.gov/about/forms/regd.pdf

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Travis Tschepen
Hibachi Bros. LLC

--My goal in life is to be as good of a person my dog already thinks I am.--

In general, the regulations (Regulation D being the most often used and cited)  that provide exemption to the SEC requirement for registration of securities before sales - do not allow for "general solicitation". Advertising would generally be considered a general solicitation - so yes it is illegal.

The fact that many people do it anyway is a subject for a different discussion. If one is intending to build a long-lasting successful business - why one would build on a foundation of sand is beyond me.

 

 

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Business Growth Masters, LLC -
Capital Catalysts for Entrepreneurs
Home of the Scalable Business Plan and QuikStart Capital Programs
http://www.bizgrowthmasters.com
info@bizgrowthmasters.com

OK, then is the author of Guerilla Financing`s suggestion--to advertise for general active partners--legal? If yes, is that a viable idea?

All right, you`re going to force me to ask--what do you mean by "foundation of sand"?

Whether it`s legal or not - why would you want to advertise for something if you really don`t want it? It`s unlikely that "passive" investors would respond to your ad.

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Business Growth Masters, LLC -
Capital Catalysts for Entrepreneurs
Home of the Scalable Business Plan and QuikStart Capital Programs
http://www.bizgrowthmasters.com
info@bizgrowthmasters.com

Since the actions taken and methods used in getting a business started (especially related to acquiring capital) have long lasting impact- it`s important to do it "right" from the beginning. While cleaning up afterwords can be done - it`s way more expensive.

In fact, a "poorly" structured early deal can turn away future capital. Hence the reference to building on a foundation of sand.

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Business Growth Masters, LLC -
Capital Catalysts for Entrepreneurs
Home of the Scalable Business Plan and QuikStart Capital Programs
http://www.bizgrowthmasters.com
info@bizgrowthmasters.com

Huh? Why wouldn`t I "really" want it? I want investors to invest in my idea.  They can be involved, kept aware, make suggestions, etc., but I want to be in control.  The pony up the cash--I deliver the results.  That`s the nature of an angel investor.

I need to find ways to find said investors.  Looking for ideas, I`ve searched the Internet and read several books.  On the Internet I`ve seen hundreds of people advertising for investors.  I read Guerilla Financing and the author says it`s illegal.  So I ask myself, "OK, the book was written in 1991.  Maybe it`s not illegal anymore."

If it`s illegal to advertise for investors, how else does one find them? Searching the Internet yields little.  Google returns a myriad of scam/junk sites that say, "Join for the low, low fee of $X and we`ll `match` you up with eager investors!" Yeah, sure you will.

I would think there`s a nice, scam-free, free-of-charge forum somewhere where entrepreneurs can post their business ideas and potential investors can read them.  If one exists, I have yet to find it.  I`ve found plenty of forums that purport to be what I`m describing, but there`s no posts in them!

Web articles on the subject are equally worthless.  They all cover the same basic things like, "What is an angel investor?" and "What do angel investors look for?" and "Is an angel investor right for you?" Just junk!  No real hard advice.

I guess I wasn`t clear. All investors are not alike. If you say you want someone to be an active partner then try to shift them into being a passive investor - I doubt that they will respond well to that.

Being a general active partner is different than being kept aware or making suggestions.

Good luck.

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Business Growth Masters, LLC -
Capital Catalysts for Entrepreneurs
Home of the Scalable Business Plan and QuikStart Capital Programs
http://www.bizgrowthmasters.com
info@bizgrowthmasters.com

OK! I have reading your conversations. You are not allowed to advertise for investors, but you could draw in an investor in a conversation or sponsorship. Conversations would normally occur about topics of investing - Start a forum or Community Building to communicate your idea. Do not ever use the term I am looking for investors or investment opportunity. Look at your state laws because you can do a Small Corporate Offering (SCOR). This will allow you to advertise locally with brochures and different materials. Realistically, it is best to start your idea off small, and then grow the business through relationships that turn out to be investors.