Forums: Discussions for entrepreneurs and small business.

 

I have a new, patented invention with a huge market.  I have used all available personal capital and am ready to find funding in the $500,000 range for production and marketing and sales.  I have no equity in my home/farm. 

I met a "broker" yesterday who assured me she could find money for me.  She wanted $5,000 to start the business relationship, another $10,000 later with the assurance she would have investors, and she wants 10 percent of the investment.    I am very leary of this; is she a scam artist? Or is this common in the money-brokering world.

This is not uncommon.  There are a lot of people willing to take your money to "try" to get you funding.  They have nothing to lose with the deal you stated here!  So you need to make sure this one has a track record of success before laying out the cash.  Ask for references and check them out.

There are other ways to get funding.  In most areas there are venture capital organizations that help companies find funding.  Over the years I have been active in many of them in our area and they have successfully raised capital for some promising Entrepreneurs.  If you have an Economic Development Council in your county government, that is a good place to start.  Google Economic Development Council and your state name and they should show up.  There are many other good options but the good ones take some time and effort on your part.

II hope this helps and good luck!

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Bert at Harvey Software, Inc.
Multi-Carrier Shipping Software and Supply Chain Solutions for Internet Retailers

Also a provider of free shipping information and resources at Harvey Software`s Parcel Shipping Blog along with free tracking solutions at TrackingPage.com...

Personally, I would not go with someone who stands to lose nothing and gain everything whether or not they find funding for you.

I would go with one of these angel investing teams or VC teams.

I would *never* give money up-front to someone who claims they can find you funds. If they find you the money, they should take their cut from the proceeds.


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Daniel the Denim Doctor

There are many people that offer such service. However, you should do a background check on this person by asking for permission, and then if the background checkout, you should ask for a contract that only benefits you since you are taking the risk. Find out if this person owns property to hold as an asset. Once the transaction is complete, you could release the property to her or him. Furthermore, make sure he or she agrees on contractual date that property will be bought back by stated date. If he or she does not go for this, you should move on. Business is serious.

I appreciate your response, as well as the others I received.  After a year of fumbling around "learning" my business, I know input from others who have had some business experience, but don`t want anything from me, is very valuable.

 

Have you considered licensing your invention to an established company in the same or a related field?

They assume the responsibility for production, marketing, sales, fulfillment, etc. You get a cut of the profit.


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Steve,

I have often heard that this is a way to lose your product, even though you have a patent.  Has anyone out there done this sort of thing?

Yes, indirectly anyway.  A friend of mine licensed a patent to a company for what looked like a great deal on the surface.  The only problem was the company did not have the money to properly make and promote the product.  The bad thing was it was licensed to them exclusively for a long period of time.  Therefore, he lost everything and could do nothing about it.  The important thing to do whenever you do something like this is to make sure you have them tied up legally.  Don’t be shy.  Make sure you cover all the bases and if they cannot come through for you, make sure you have a way out.  Get a good attorney to protect your interests if you go down this road.  There are a couple of them floating around on SuN.

 

One last point, the reason people do this is because they lack the money to do it themselves, or they do not have the ability to get the job done on their own even if they did.  It is the right thing to do for most inventors.  Some be people are better creators than business people.  Those that realize this many times do much better than those that do not.

 

Good luck!

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Bert at Harvey Software, Inc.
Multi-Carrier Shipping Software and Supply Chain Solutions for Internet Retailers

Also a provider of free shipping information and resources at Harvey Software`s Parcel Shipping Blog along with free tracking solutions at TrackingPage.com...

A couple of comments:

1. Based upon years of experience working with entrepreneurs in early stage businesses, YOU (not your plan or idea or patent) will be the single most important ingredient in securing funds. Investors will want to "look you in the eye" before they write a check.

2. Anyone who receives a "success fee" (10% of the investment) MUST be a registered securities broker-dealer.

3. Sinice you are not a public company - anyone who "makes an offer of securities" must either be licensed (above) or be an officer of the company.

The bottom line is - it is virtually impossible for a 3rd party to secure funds for a startup situation.

You would be far better served to engage with someone who can teach, guide and support you in the process of securing the investment.

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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