Zachary Hiller Law. How to raise capital, hand holding cash

As an attorney in private practice I have a unique insight into what it takes to run a small business. I know the daily balance between running the business and working on a passion. I have a passion for the law; I find it fascinating, challenging and exciting. I look forward to coming to work everyday. But that zeal is not enough to create a successful business, so I must balance the business of practicing law with my love for the law to ensure a company that will thrive for years to come. This is a challenge I see with many of my clients, in particular those who are trying to launch a business based on new invention. Having a great idea is only a small part of the process. From there exists many hurdles to getting the product to market, including raising working capital to keep the lights on and the company moving forward. There are many articles on how to raise capital for a new venture, but I offer this one with a bit of legal thinking in mind. After all, find investors to raise the money is only a small part of the equation. The second question is what is this capital going to cost, legally.

How To Raise Capital For A New Business

It is never easy for entrepreneurs to raise funds for their ventures, but it is not impossible. It is important to understand the pros and cons of all of your options when searching for funding opportunities because there are legal ramifications to every option. A lack of access to capital is the number one reason that many new ventures fail, so very often entrepreneurs rush out to raise money to keep their dream alive. This zeal can have disastrous consequences if you don’t understand what you are getting into. Taking money from outside sources will always come with strings attached, but the smart entrepreneur does not allow themselves to be hogtied by these strings. Working with an attorney throughout the process can help ensure that outside investment won’t hamstring your success. Here are some common options that entrepreneurs turn to when trying to raise capital.

How to raise capital, Law Offices of Zachary Hiller Houston, TX

Every investment in your company comes with strings attached. Do you know what they mean for your business?

  • Friends and Family: Who better to invest in your future than the people that love you most? So often entrepreneurs turn to friends and family for some of that crucial initial funding. If good fences make great neighbors, then excellent contracts ensure family affairs stay out of business affairs. Taking money from family or friends should only be done when they absolutely understand the potential risks and rewards to their investment. Working with an attorney can ensure that every eventuality is covered so your family understands the terms of the agreement and the type of investment that they are making.
  • Public funding: State and Federal Grants and small business loans through the SBA are good ways to raise capital for new business ventures. Many local and state governments have recognized the need to keep small business start-ups in their home states and have created various funds and programs to help drive innovation. While many of these are fantastic programs, it is important to understand the requirements and regulations that accompany such capital. It helps to have an attorney review any and all documents associated with such funding options to ensure that your company is compliant.
  • Venture Capital Funding: These are firms that have the capability of investing great sums of cash into your company in exchange for an ownership stake in the company. Often times, small businesses are so wowed by the potential infusion of capital that they fail to see all of the potential ramifications of working with a venture capital fund. These deals are often attractive because venture capital companies often come with a track record of success. Some of this success comes from inserting their own corporate leadership into the new company while others simply offer mentorship and connections to help a small business succeed. Companies should always have a trusted legal representative review any documents that would come from a potential VC to ensure all of the benefits and potential ramifications are thoroughly understood.

These are only a couple of the options open to a new business as they struggle with the question, how to raise capital for their company? While the options for funding are varied, there is a common theme to all. Work with a trusted attorney as you journey this path to ensure you know exactly where you are going and what it means for the future of your company. The law office of Zachary Hiller can help ensure you navigate every opportunity and pitfall as you bring your product to market. Call us today.

 

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