As you may imagine, I am constantly pitched ideas and companies. One of the most common selling points I hear people use is how much of their company they are willing to give up. They’ll say, “Hey Daymond, I haven’t made a profit yet, but I’ll give you 60% of the company!” While I appreciate the generous offers, I am always troubled by the ease at which people are willing to give up percentages of their companies, sometimes even the controlling stakes. The root of this problem is that people are so desperate for funding, and so limited, or they think they’re limited, in their resources that they undersell themselves and do their companies huge disservices in the long run. Sure, at a certain level you may need to give up some of your company, you might even sell your WHOLE company (that’s called an “exit,” and it is what many entrepreneurs and businessmen seek). You just want to make sure that when that day comes, you’re not killing yourself for giving away a significant percentage of the company when it was in its beginning stages, because you were desperate for capital.
There are many ways to get funding, and several do not require giving up equity. Landing a large investment in the beginning stages of a company is not always a good idea. If I had gotten 50k in FUBU’s early days, in exchange for 50% of the company, that would’ve resulted in a huge financial loss. I learned how to manage my inventory by purchasing goods $1000 at a time. With a big investment early on, I would’ve bought way too much inventory, which I wouldn’t have been able to move, as they probably would’ve been inferior goods, and I would’ve been screwed. Plus, I would now only own 50% of the company and when it grew larger and I needed more partners I wouldn’t have much left to give and I wouldn’t be able to get any more money from my original partners. A young entrepreneur needs to bootstrap and learn his business from the ground up. Make your mistakes when the stakes are low, that way when you are ready for the big investment, you know what you’re going to use the money for, and you actually have something to bargain with because you didn’t give up half of your company in it’s first year. The point of becoming an entrepreneur is to be your own boss, don’t end up an employee of your own company by giving up too much.
When I was young entrepreneur, like most people who are just starting out, I didn’t know where to go to find funding money for my companies (Keep in mind, this was before the internet). I tried to get loans and was turned down by 27 banks. I had offers from individuals, but even if I was willing to accept those offers, I had no idea how to quantify how much of my company the money would be worth, nor did I know if these “investors” had the knowledge to help me. In addition, part of why I started my own company was because I didn’t want to have a boss, and I knew that if I took on a huge investment I would have to answer to someone. Instead, what I did was hit the streets and sell my product directly to the consumer. I learned firsthand what people liked, didn’t like, what was selling, what I couldn’t get rid of etc. The equivalent today would be to launch a Kickstarter or set up a kiosk. This is called “testing the market” or creating “proof of concept.” Sure, you may fail the first few times, but you wont be failing with someone else’s money, and when you do succeed, you’ll have funding, free of any strings. Furthermore, most new businesses aren’t set up to handle a large investment. They don’t have their taxes right, or their financial structure organized probably. Financial intelligence is key when being funded. Bottom line: make your mistakes early and with your own money, that way when you are responsible to investors, you know how to operate. People love to talk about the value of using “O.P.M.,” Other People’s Money, but that “M” can stand for many things that can be beneficial to an entrepreneur. It can stand for “Manufacturing,” or “Man-power,” or Mind-power, and of course there are always lessons to be learned from “Other People’s Mistakes.”
Things have changed quite a bit since my formative years. Thanks to the popularity of shows like Shark Tank and The Apprentice, the public has a basic understanding of how the VC and angel investing world works, and how companies get funding. This kind of funding is happening every day all over the world. People are getting into these “shark tanks” and pitching their hearts out. Corporations have begun to throw their hats in the ring as well, competing with VCs and angels for property in the startup world. Despite the popularity, public knowledge and accessibility of this kind of funding, the same problems remain: how much do you need to give up, and do you really want a boss?
Over the last several years, I have made it my priority to align myself with some incredible companies that value entrepreneurship, and are giving away resources AND money to people who know how to pitch, or have a great idea. Best of all: they don’t want a percentage in return. I have identified some of these terrific organizations that put their money where their mouth is below:
I have been working with Shopify for two years now. Shopify holds annual contests in which it reward entrepreneurs with sizable investments. We just wrapped up the Build-A-Business competition for this year, but follow them on Twitter and Facebook for updates and check out the case study on SharkBranding.com for some cool facts. http://www.sharkbranding.com/clients/shopify/
With its new “Tap the Future” (http://www.mltapthefuture.com) campaign, Miller and I have worked together for two years, identified thousands of incredible start-ups and rewarded two of them with $250k each, for a grand total of $500k.
Formerly known as Startup America, UP Global is huge force in the entrepreneur empowerment world. Through groundbreaking programs like Startup Weekend, Startup Next, Startup Digest, and Startup Next, they have served over 150,000 innovators in 500 cities. I am happy to say I have been partners with Up Global for over three years.
InfusionSoft:With the launch of their “Own Your Summer” campaign, I have teamed-up with Infusionsoft to furnish entrepreneurs with terrific marketing tools for their small businesses. In addition, we are giving away prizes daily as well as a big grand prize! Check out http://ownyoursummer.com for more info!
Edison Nation is a terrific organization that gives entrepreneurs the opportunity to put their business ideas in the hands of professionals. For only $25 you can have your idea evaluated by a team of professionals. If they like your idea, they will fund it and give you a generous split upon sale or license!
With their BizSpark program, Microsoft is offering start-ups free software, developer tools and support, to help grow their businesses. They also give users free access to the Windows Store and help them promote within the BizSpark community.
Moguls Mobile:To commemorate the launch of my new lifestyle technology brand, Moguls Mobile, I have partnered with GS Venture Partners LLC and Edison Nation to invest $5 million dollars in the development and acquisition of new technologies and services created by entrepreneurs that match the “mogulpreneur” lifestyle. Have an idea for a mobile accessories? Contact my team at firstname.lastname@example.org
This year alone, I have collaborated with these companies to earmark or give away up to $10 million to young, motivated entrepreneurs. Thanks to the work we have done, these entrepreneurs can launch their companies and don’t have to give up percentages in the process.
I’m sure these aren’t the only companies giving money to hungry entrepreneurs, but these are the ones that I KNOW not only talk the talk, but walk the walk. It’s time for other big businesses to step up to the plate and reward entrepreneurship! I’m calling you out! I’ve heard that Wells Fargo, Walmart and few other big corporations have earmarked money for this purpose but I am not aware how exactly they are distributing these funds. I am also aware that there are publicly funded Shark Tank-style pitch competitions going on all over the nation. These can be extremely valuable as even if you don’t win, you have the opportunity to refine your pitch and learn key secrets. If you know of any other companies or organizations that are rewarding entrepreneurship, please leave links to their initiatives in the comments. Let’s give these guys the credit they deserve!