Summary

In this conversation, Jon Stoddard and Natu Myers discuss the essential strategies for raising capital from investors for acquisitions. They cover topics such as deal structure, investor expectations, the importance of high net worth individuals, and the systems needed for successful capital raising. The conversation emphasizes the need for financial preparation, effective marketing strategies, and communication with potential investors, culminating in special offers for attendees.

Takeaways

Raising capital requires a well-structured offer.
Investors typically seek a 5 to 2X return on investment.
High net worth individuals can be valuable investors.
Compliance systems are crucial for legal fundraising.
Financial preparation is essential before approaching investors.
Targeting the right audience increases fundraising success.
Utilizing a spearing method can enhance investor outreach.
Building rapport with investors is key to securing funding.
Effective marketing strategies can attract potential investors.
Special offers can incentivize participation in fundraising efforts.

Chapters

00:00 Introduction to Raising Capital
02:53 Understanding Deal Structure
05:49 Investor Expectations and Returns
09:09 The Role of High Net Worth Individuals
12:03 Systems for Raising Capital
14:48 Financial Preparation for Acquisitions
18:10 Marketing Strategies for Investors
21:04 Effective Communication with Investors
23:56 Conclusion and Special Offers

Transcript

Jon Stoddard (00:00.558)
All right, so again, it's now being recorded and I want to welcome you to how to raise capital from investors for your acquisitions. Your host, Natu Myers from races.com and John Stoddard, Dealflowsystem.net, host of Top &A Entrepreneurs podcast and CEO of Dealflowsystem.net. So let's get in a couple of things. Just some kind of housekeeping items. If you have some questions,

Put them in, if you think about it while we're going, just put it in a chat. We'll go through them later. We're not going to stop each time to answer questions. If Natu and I have a couple special offers, if you stay till the end, we have some free gifts for you. You got to stay to the end because it's going to give you instructions on how to get these items. We're going to give you some special process to get these. So stay till the end.

And we're also going to share another link at the end. So here we go. Let's get started. And by the way, I want to thank you. This is like Southwest Airlines. We know your time is valuable and there's a lot of places you can be. And we thank you for stopping by and watching this information. So here's what we talked about is what exactly we'll be covering in this webinar. Number one, deal structure, building an offer that is tested

validated and explainable to investors. This is my section. I'm going to be covering that. And I'm going talk about the first one to talk on that subject. The second one is relationships, developing genuine relationship with potential investors. Natu is going to cover that one. And when it gets to that spot, I'm done talking. I'm going to transfer to Natu and he's going to have a screen share. Number three.

Systems and process, outgoing, incoming, a flow of potential investors. Natu is also going to cover that one. And if you have any questions, put it in chat. We'll get to them afterwards. All right, so let's get to my section here. The first thing I want to do is introduce everyone to it. You may have seen us on LinkedIn. If you stopped on raises.com.

Jon Stoddard (02:24.619)
Natu does a fantastic job of retardering. You'll see his handsome face everywhere. So Natu Myers, he's founder of Raises.com. You can create real estate or &A activity, equity funds, syndication, two weeks, raise $10 million, CEO of Raises.com. He's also the best selling author in private equity. And he's helped raise over $200 million. All right, and myself.

I am John Stoddard. I'm an investor. I'm still working on my fourth acquisition, looking for the right deal. I'm the host of Top &A Entrepreneurs. That's a podcast interviewing serial acquisition entrepreneurs. I've done close to 100. And I got to tell you, I love doing it because I learned 10 times as fast. I'm also a business buying coach, dealflowsystem.net. I acquired three businesses. I shut one down.

Just to let you know, it doesn't always work out. I sold one, still minority shareholder in the third. I was also did my share of startups. I worked at TurboSquid, co-founded that VP of sales and marketing. We raised 5 million from VC from Intel and many, many, many years later that was sold to Shutterstock. It did not hit its potential. So that's just how business works. All right. So number one, deal structure, building and offer.

that has been tested and validated. So everybody knows this show, right? This is Shark Tank. You walk through that door and the first thing you do is give your pitch. And if you're trying to raise money for an acquisition, you're gonna say something like this, I am seeking $180,000 in exchange for 14 % of my company. We offer a 10 % dividend and you will make all of your money back in five to seven years.

That's what you're going to be saying something like this to the investors. Let's unpack that and show you how what that looks like. All right. So let's say you find a good service business in your area. I mean, it could be any business. So just expand your horizons there. But it's doing two million dollars a business earning six hundred thousand a year. I've seen a lot of HVAC companies do this. I've seen a lot of like

Jon Stoddard (04:50.893)
CPA firms doing this service based businesses are very, profitable and they allow the owner SBE, which is they could pay themselves in expenses, but every cashflow is that income goes right into your bank. So that's why they make a lot of money. But you want to buy a business, you want to buy this business and it only has you only have 20 K and.

Let's say, okay, I'm gonna use leverage. I'm gonna use SBA because it's in United States. It's one of the magnificent things about being in this country is the government says, we want you to buy a business. We're gonna do everything we can to let you buy a business and we'll guarantee. So SBA says you need 10 % down, which is 200K of that business. That means you need to raise $180,000 from outside investors.

You're to have to use debt for the SBA for the other 90%. So that's 1.8 million. Interest rate on the SBA loan is now whopping 10.5%. Seems to be going up because inflation is still at 7%. That's a 10-year loan borrowing 1.8. That's 24K per month or 288K per year on a 10-year loan. Now, if the investors come in with that 180K,

you could potentially own a business that has after debt, after the SBA debt, earnings of 312,000. Not bad, not a bad prospect. So what do investors look like? First of all, most of these investors that are coming in with 100, 180K, you know, they're not VC firms. VC firms are for startups, startups that got, have a billion dollar potential.

Usually not private equity. It's just too small. It doesn't move the needle. It's definitely not hedge fund. Just you may find some family offices that allow you to borrow the money. But again, it's it work with family offices just a little bit different. They're there in the preservation of money. They're not about making a lot of money. Most of the times these are HNW eyes, high net worth individuals. It could be doctors. They could be so business before.

Jon Stoddard (07:16.171)
They usually been there, done that, they see themselves in you. They want to help you. They love helping the entrepreneur. So that's one of the keys you're looking for in a high net worth individual. They don't want to grow up any or manage people. They just want their money to go to work for them. All right. So what does a high net worth individual investor want? look at that guy tonight.

Number one, most investors will be looking for a five to two X multiple on invested capital. Now, most of them are going to have some kind of like this is what we look for. What does that mean? That measures the investment returns by comparing the value of investment on the exit date. So if they put in one hundred eighty thousand dollars today, five to seven years from now, they're going to expect three hundred sixty thousand dollars. They also want a dividend.

And dividends are regular profit sharing made between a company and its investors. Dividends are paid regularly on a basis. when you pay somebody, if somebody gives you $180,000 and you say, I'm going to pay you a 10 % coupon per month, that's confidence in them that their investment is being taken care of. That's just another way one of the investors earn a return from investing in stocks.

It's very common to see investors ask for 10%, maybe around 8 to 15%. 15 % is really high. I think it's more going to be like 12%. You want to offer investors enough equity in the business where they're going to achieve their desired return on investment. But you can't offer them too much because if you're offering a dividend, it's going to harm the company's profitability. And here's the big one.

An investor that puts $180,000 in is unlikely to want to go through SBA's personal guarantee because once you hit 20%, they got to go through a financial proctology, which means they got to, which means legally it says the business goes sour, the investors on the hook for their share. They're not going to do that. They're going to turn up their IRS documents. They're not going to do all that. It's usually, so it's usually going to be around around 10%.

Jon Stoddard (09:38.517)
Investors are concerned about how do I make my money back? If you go to Shark Tank and it goes, how are they going to get their money back? One guy is going to ask for debt. other guy is going to mark Cuban. It doesn't really care. He's worth $4 billion now. But how do you make your money back? Because he still has got to be an investor on this. The way you do that is with a put option that they can exercise in five to seven years.

They put option as a contract gives the investor the right to sell their shares at the current market valuation. All right, so also the investor will also likely ask for preferred shares. Preferred shares offer a guarantee that the investors making money off their investment through dividends. We already talked about that. What that looked like could be 10 % right around there. Preferred shares also carry no voting rights, but are always paid first over common shares.

that puts importance to the investors saying, hey, we care about you. Things go south and bankruptcy or something like that, you're going to get paid first out of the assets if you can get anything. If the company does file bankruptcy, they're entitled to receive their money and payment first from stockholders. All right, so if investors like the deal structure with an offer that's been tested and validated, they're going to start asking you about

You know, let's say if they're going through this door and they like that offer because you came to them professionally, the next door is great. What does the customer pay? What's your backstory? All these tangible things about the business. And who are you? Why should I give that guy $180,000? So I found this on the Internet. I thought it was pretty funny. It's perfectly what I was looking for. All right. So.

There are huge benefits of bringing high net worth individuals to the deal. And here's what, bringing in high net worth individual will allow you to purchase a much larger business, maximizing profit. And that means at the end of five to seven years, if the investors exercise their option, you are now the majority owner of a 2 million top line from a 20K investment.

Jon Stoddard (12:03.149)
So it behooves you to kind of maximize that, know, sometimes like, Hey, you're chasing small. That's all I can afford. Chase is small. That's all I can afford. But if you had $20,000 and you found that you could bring in an investor, like they know you, they know you're going after $2 million deals and they trust you. Bring in investor for 180,000. Now you can put $200,000 down on a $2 million business. And congratulations. you are ready to go. So.

This is a offer that's tested and validated. These are what they expect. High net worth individuals. They're not VCs. They're not private equity. They're doctors, ex-business owners. Somebody is a millionaire next door. You don't know about. mean, my kid plays with a guy, a kid that his dad sold a business, pharmaceutical business for, I don't know. I think it was like $20 million. I didn't even know he was that wealthy.

These are the kind of guys that like to put money back into people like you. So at this point, we're going to hit to number two. And then I'm going to share my screen with that too. He's going to take it from here.

Jon Stoddard (13:20.747)
Natu, you ready? Yes, I am. I just gave you sharing capabilities. You should be able to see it. All righty. All right, hold on. I still don't see it, so OK, I got to stop my share and then OK, here we go. Everybody still with us? You put it in a little note in the chat saying, hey, yeah, we get it. We see it. Good deal. Good job, John. Like, you know, just take some time to tell John like keeps people awake.

Like he doesn't really, yeah, he doesn't mince words. Everyone can see my screen, right? so listen again, John, good job there. So, you know, what I like to walk through is three systems that you need to have in place to raise that money for that down payment. Because as John said, yeah, you need to, you need to be able to make an offer to the right type of investor, not just a VC that'll waste your time or anything. then, but then how do we actually do that? And how do we actually get it done? So then.

I just broke it down into three here. One is the compliance systems. So these are the legal, essentially the legal, and if John, you can help me with the admission of new folks, but these are the legal drafts that people need for them to be able to sell their deal to investors that have the money to be able to invest. The second thing is also the financial pieces of it. You know, it's like, what are the numbers? And then the third thing is the marketing. How do you actually go from somebody who doesn't know you to somebody who can actually like say yes, and then, you know, put the money and set,

wire the funds to the right escrow. yeah, so the compliance. So basically, I like splitting it down into these three pieces. We have some people in Scotland, most of you in the United States. We have some people in Canada. basically, what is your country's regulatory body, your country's regulator when it comes to equity? What do they say that you can do? So basically, there's that, and there's also the states.

or the province if you're in Canada, but in the States. And what does the state say that you can do? These are called in the United States, these are the blue sky laws they say. But then the way by which you can actually sell the deals, we call them exemptions. Because either you're selling a deal by going on the public markets, or you're selling it privately. But if you're selling it privately, you're not going public. So it exempts you from having to go public. So you're not registering. You're using an exemption, something that

Jon Stoddard (15:46.733)
and says that you don't have to go through that process. In the United States, many folks just use the regulation D506C. So all those letters, all those scary letters, all they mean is that you're able to raise capital with people that call themselves accredited investors. So you can raise an unlimited amount of capital. And if you can do that, then credit investors in the United States to make over 200,000 annually or, and there's several other criteria. And these are the ultra high net worth people you wanna target.

So these are the rules that you can follow and there several others, but these are the most common ones for the folks in the United States. And so going to the next one on the financials, this one is pretty quick. It's just preparation. Just making sure you your budget. It's like if you're buying a business, it's like how much should I pay for like a lawyer or should like art or closing costs? How much is all of that? So just having the plan to know what's going on is good so that you don't go through the deal and then last minutes.

You have somebody say, a lawyer has to pay this last minute. So you want to make sure that you plan before you get into this game for those who haven't already. The next is also the underwriting. It's like if you're looking to buy a business and you're looking to bring people to make that down payments because you only have 20K, as John said, then it's like, wait, how can I prove to this investor that the money makes sense? That if I'm underwriting this deal, the investor, how can I prove to them using the Excel spreadsheets that's

The deal is worth me even acquiring. It's worth me acquiring. It's worth me putting it under contract. And then after I acquire it, then it's like the performer. After I acquire it, in the next five years, how is it that this deal is going to make me money? And how can I prove that? And what arguments could I put together to prove that? So these are the financial statements. And in short, then there's the tax, and then there's the reporting. It's super important. It's like, if the business, what change happens if I buy the business with regards to tax and everything? And how does that affect the investor?

So once you have that in place, financials, then it's the marketing. So with the marketing, there's the, and don't be too confused with all the arrows, let's go back here. With the marketing, there's the audience, audience being people, high net worth investors have a criteria, they have a mandate. So if you get all this stuff together, then you'll be able to get the,

Jon Stoddard (18:10.805)
the idea on who's going to invest in what. Because once you have the audience, you have the benefits to that audience. Is it capital preservation? Is it, in five years, I'm able to take my, like I'm able to get a 2X ROI or anything. How much effort do I have to put into getting to this deal? basically what does it cost me to put money with you as opposed to somebody else? And then what is the type of deal it is? Is it a corporation where like I take,

like liability, like, I have to work with the SBA and then if the deal goes down the toilet, then, then I have to be the one to be liable for that or is it a limited partnership where I just passively invest and then I'm not liable for the day to days of the business. And what is the channel through which you're finding these investors? Most importantly, is it through LinkedIn? Is it through warm introductions? Is it through seminars in person? it like golf clubs or what? How the hell do I find these investors? Excuse my language for the investors here. So

you know, for that, let's just double click on channels. So I like to break down channels in two different pieces. And there were those a few mentors I was working with that they did this in the online, you know, course space. But the same thing applies to some investors, you know, because one of the fellows that we worked with, Henry, he closed, you know, about just 100,000, not a giant amount, but it's pretty good for his, you know, his small acquisition that he's working on. And for that, he used the spearing method.

Where it's a spearing is when you really get a spearing. Imagine you have a spear or a laser and then you're targeting investors specifically and you're doing research on them upfronts. And you're saying that, hey, I know this guy from this golf club or this, and then you're just targeting people with very few high quality messages. And then you have nets. Nets is when you get people en masse and when you're doing broad outreach. you have emails that are specifically targeted towards people. You have introductions.

The first time I ever spoke to a billionaire was when we had, made friends. So at first he was a net. It was like a LinkedIn automation. And then I met a good friend, Andrew Damon based in Palm Springs. And I told him that a 500 megawatt, you know, solar energy deal. This one was based in Australia. And then he connected me with somebody from Nevada because he was incentivized to help me close the deal. And, you know, after that, he connected me to somebody at a company in China. He was, was GCL.

Jon Stoddard (20:34.669)
And it was to make a solar wafer purchase and meeting that billionaire, was just through connecting and getting introduced to the right person. Another person I worked with at AOLA, like we weren't able to get the investors through the broad outreach, but it was through the introductions and LinkedIn. That's how he closed his first multifamily acquisition from flying to Canada from another country in 2019, having no connections here. So it's really powerful if you combine both is my point. And the next is more newsletter ads and webinars like this. All right.

So Spears, yeah, gotta forgive me. had another one where it was like more one step at a time, but don't be scared of all this guys. But all this is, is just saying that you want to optimize your LinkedIn profile. know, make a nice LinkedIn profile for the, for the Spearing approach. And then what you want to do, you can get an army of people that are actually reaching out on your behalf. You know, you get your team members, get VAs, virtual assistants, get anybody to copy what you have on your LinkedIn profile.

And then can have literally an army of people on your LinkedIn. And then if people say no, just keep adding value to them. But then the goal is to try to get them on a call and connect with people without pushing an agenda. So if you guys want, just go to razors.com slash uLink and you'll be able to get access to one of the tools that we recommend. And please keep it, don't spread the word too much. That's why it's invite only or else.

they don't want everyone knowing about it, but let's go to raises.com slash Ulink and you'll get access to that free tool and then check it out. And then after that, here's the Nets example. Nets is you have a landing page and then you bring a ton of people in. If you go to grantscardon.com, or cardoncapital.com, he has a Nets approach. So you have the landing page up, you collect email and phone number in exchange for giving them something of value. And then in exchange for that, what's going to happen is,

you actually ask them for, you know, to get on a call, you know, and then you send them the email follow-ups, text follow-ups to get on a call. And if they keep saying no, then what you do, you just offer value. Try to say, hey, this is useful for you, whether or not you work with me or not, you know, and let go of the obsession of getting them to say yes. And ironically, they will start saying yes because you're giving them more value than otherwise. So just check out razors.com slash go high level.

Jon Stoddard (22:55.051)
That'll give you access to a landing page builder. It's just like a JV I have there. And then they have what is called email newsletter, like email newsletters, like landing page, text follow-ups and all that stuff combined into one offer. I haven't seen anything that's that cheap and everyone's using it in the agency space. So go check it out to build your landing page. And we use a template from one of the clients that I work with. So you can just copy the template and change your name and change the logos and all that.

All right. So bonus. So what are some investor scripts? So I'm not going to go into the details, but basically at a high level, you have two scripts, right? You have one script when you go to the investors and then you have one where the investors come to you. And so when you go to them, when they come to you. So if you go to the investors, make sure that you introduce yourself, right? And then you cite something about them. It's like, you know, Hey, bond capital in Vancouver. That's another investor. For example, you should check out, Hey, bond capital. saw that you invest in $3 million, you know, deals.

without syndication. Can I confirm that you're doing this as a either, like you don't even have to confirm if they're a credit. So then confirm with that credit. Next, I just have some questions about your mandate because I may have some deals that fit in that mandate. And then genuinely try to understand what they're investing in. And if you just try to understand what exactly they're looking to invest in and then ask them what the next step is.

So these are for the bigger ultra high net worth that are more fussy, right? But then when it comes to the smaller guys, when they come to you, make sure that you have your own, know, use Calendly. So make sure you have your own calendar set up. Make sure that when you set up your calendar that they have to have a check mark that says, I'm an accredited investor, right? And after, you know, they come to the call, build rapport of them, be human. Don't follow any hardcore, you know, sales script, just be human and then set the, just set a nut like.

What we usually do is we just want to make sure that this is something in your mandate or anything. You don't want to be too pushy. And that's just my style, but don't be too pushy. And then just try to see if they're trying to find deals in the mandates. And then after you get that, book them to a second call where you go over your deal with them in detail. But that's pretty much it. And if you combine everything, then eventually you're going to have a process where you could, number one, build your compliance where you can compliantly get the investors in. Number two,

Jon Stoddard (25:19.799)
You have the financial plan, so there's no surprises. Number three, you have the marketing, so you can turn people from the stranger to warm to eventually they invest with you. And so that's pretty much it. And we're going to bring it off to John.

Jon Stoddard (25:36.438)
Ooh, you're on mute.

Jon Stoddard (25:40.363)
You're on mute. So thank you very much for Natu. If anybody has any questions, put them in there. We'll get them to them in a few minutes. I just want to talk about a couple of things here. And I'm to go back to my screen. So you guys stayed all the way to the end. And I want to just show you something. It's an offer. If I have your permission to go this. Raises has an offer. He works with you one on one and in a group to help you raise capital. And he's done.

He's got this done for you creation of advisory of Drash marketing materials, done for you creation and advisory of financial capital raising materials, done for you capital raise intros, done for you support, which includes mastermind, weekly support, Q &A, mastermind community, live support, each week of finance practical outreach strategies, and a bunch of growing library of calls. Now, also he's got online mastermind communities.

I'll be joining that to at least to help him out if I can do anything. Now I, on my side, have my, a million dollar business course. Number one, goal setting. Number two, ideal acquisition target, really focusing on companies that got enough cashflow to handle that profit margin. And then I go into, Excel or exploration calls, knowing what to ask the seller to uncover anything.

due diligence, analyzing deals. You know, you got to dismiss the dogs real fast so you can get to good deals, valuation, negotiation, the deal for lessons, how to raise capital, finance a deal that kind of ties into what that tune's doing. That's why we reached out and partnered with them. and also how to grow your business five times faster through acquisitions. Cause you guys want to be serial acquirers, right? Get that first platform company and then start acquiring eyeballs like

You know, like who's that Canadian actor, Ryan Reynolds, man, look at that kind of firing stuff, know, soccer team, all kinds of stuff. And he's so Natu offers this for 9,600. I offer mine 49.95. We're not going to do that. You can get this from both of us for two payments of 1997. It's basically a twofer. We're going to help you find a business. We're also going to help you raise capital to leverage investors. So.

Jon Stoddard (28:05.356)
Thank you so much for staying to the end. Thanks for watching this video. Make sure you're a subscriber by clicking on this button right here down below. And if you want to watch more serial acquirer interviews, click on this button right here. If you're ready to buy your first business, get my course at dealflowsystem.net right here. Take care. Cheers, John.

 

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