rachel2w1w: Start Making Money

Raising funds for a small business can be a daunting task for any fledgeling entrepreneur. Whether it be from friends and family or from the general public, finding investors, setting terms of the funding, assigning equity and filing compliance documents is a challenge. Enter ProFounder, a stealth startup that launches today to ensure that all entrepreneurs and small businesses have access to an easy and simple fundraising platform.

ProFounder, which has been in private beta for the past year, offers entrepreneurs two ways to raise money on the site: through a private fundraising round, and/or a public fundraising round. The private fundraising rounds allow entrepreneurs to share a percentage of their revenues with investors (their friends, family, and community) over time. Essentially, this type of fundraising round is an offering of securities, and ProFounder helps facilitate compliance with state and federal laws related to this offering.

Public fundraising rounds allow entrepreneurs to share a percentage of revenues with both investors (anyone can participate – friends, family, community, and general public too) as well as a nonprofit organization. For both public and private fundraising rounds, ProFounder has a limit of $1 million raised.

Entrepreneurs can apply to Profounder, upload a pitch to offer to potential investors and then create a term sheet with Profounder’s templated forms and compliance sheets. As stated above, the term sheets are based on a revenue-share model. ProFounder then gives businesses a page where they can invite friends, family, and investors to a destination page that allows users to make contributions and investments directly on the site.

The bonus of using ProFounder is that the platform allows unaccredited investors (i.e. friends and family as opposed to a venture firm) to participate, so anyone can be an investor. And entrepreneurs can set their own investment terms and ProFounder facilitates all of the compliance, including tracking the number of investor seats in each state where each of their investors live, making sure entrepreneurs know which compliance documents they need to file, making sure entrepreneurs know which filing fees to pay, etc.

ProFounder, which was is the brainchild of Kiva co-founder Jessica Jackley and fellow Stanford Business School alum Dana Mauriello, also manages payouts and will pull funds from the entrepreneur’s bank account every quarter to pay investors their share of the business’ revenues.

ProFounder makes money by charging a 5 percent fee (of a public raise) and/or a flat $1,000 fee for any private raises.

If a company pays out investors before the terms of the deal end, then founders can choose to donate the rest of the revenues to a non profit organization. For example, if you offer two percent of your revenues to investors over the next five years and within two years, everyone has been fully paid, then the next three years of two percent of your revenues will go to the nonprofit.

To date, ProFounder has facilitated 5 successful private fundraising rounds, raising a total of $155,000 and engaging a total of 108 investors. For example, Bronson Chang, a recent USC alumni moved back to his native Hawaii to help out with the family business—a candy shop in Honolulu. Bronson wanted to open another shop in the area and raised $54,000 from 19 community members including friends, family, and USC classmates. Bronson is also currently raising an additional $60,000 through a public investing round.

Another private beta tester, BucketFeet, is a start-up from two recent college grads that makes hand-painted sneakers. The fledgling entrepreneurs managed to raise $60,000 from 37 investors including friends, family, and classmates across the country.

ProFounder’s model is similar in some ways to Kiva’s microlending, which recently opened up its platform to American entrepreneurs. Other companies playing in the space include Kickstarter, and Prosper.

But Jackley and Mauriello say that with the 27 million new and existing small businesses in the U.S., there are plenty of opportunities to offer fundraising and investment platforms to this demographic. Eventually, ProFounder will include social networking integration and possibly a convertible debt option for term sheets, say Jackley and Mauriello. In the end, Mauriello says, it’s about making sure that small business entrepreneurs have access to much-needed resources in terms of raising money.

When I do a talk about entrepreneurship for students I regularly bring some money and hand it out. Not a lot, but more than enough to get them well on their way to launching their first business and becoming insanely rich. I also announce this at the beginning of my talk and usually they get pretty excited about the prospect of going some with some money. By the end of my talk I remind them of the money, I call it funding, I promised at the beginning of my talk. Then I hand out envelopes to the first 20 or 30 students that make it to the stage first. The envelope contains 1 euro or dollar, and my business card.

The proposition I make is simple; take my 1 euro or dollar and take 1 week to double it. Then use the two dollar and multiply that by two in the second week. After 21 weeks you’ve got your first million and after 28 weeks you are at 100 million. By week 31 you are a billionaire and after 7 week you are the richest person in the world. After 45 weeks you will own all the money in the world, and some change.

Part of the deal, and why my business card is in the envelope is that they have to agree to give me 1% of whatever they made after a year. I’m eagerly awaiting my first few billion from the first student to do well.

Of course I don’t expect any of those students to keep doubling their money week over week. What I do hope is that they will start thinking differently about making money. Most people dream big, and that is fine, unless those dreams stand in the way of actually making money. And making money can be very simple. So simple that you can get started on it right now. In fact, leave your email-address in the comment field and I will fund you your first euro, or dollar, to get started. All I ask in return is 1% of your newly gained wealth after a year.

If you can turn a dollar into 2 dollars you are successful in business. Now all you have to do is scale that.

eric seiger do

Wednesday, December 1, 2010

Start Making Money

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