For entrepreneurs, finding investors has been a problem until now

Citation

(2007), "For entrepreneurs, finding investors has been a problem until now", Journal of Consumer Marketing, Vol. 24 No. 6. https://doi.org/10.1108/jcm.2007.07724fag.001

For entrepreneurs, finding investors has been a problem until now

Edited by Dennis A. PittaUniversity of Baltimore

For entrepreneurs, finding investors has been a problem until now

Coming up with the idea for a business is usually the easy part. Finding out how to raise capital to get it going is a whole other story. Finding investors seems to be the point that most people get stuck on. Worldwide, government agencies agree that inadequate financing is the second most common reason that businesses fail, exceeded only by poor management. So the main thing an entrepreneur needs to know is where to find the capital to fund that next great idea. But that has always been the tricky part of the business world. Until now.

RaiseCapital.com[www.raisecapital.com]

In the past, raising capital was the biggest challenge of getting businesses up and running, and for many companies, it was overwhelming. The new web site, RaiseCapital.com, is a resource that entrepreneurs can use to bridge the gap between their business ideas and investors.

RaiseCapital.com is a totally new development that promises to change the way to finance a business. The web site functions as a clearing house for entrepreneur-investor relations. It is something like a dating service, only the relationships are based on business not romance. Beyond the venue, there is another similarity: the new dating services employ multimedia techniques to give a more realistic picture of the dating partners. Like users of personal introduction sites, entrepreneurs can use text descriptions, photos and even streaming video. The richness of the information technology provides the means for a robust and clear picture of the opportunities and potential payoffs.

Entrepreneurs and others seeking funds, for new or existing businesses, place an ad in the RaiseCapital.com directory. After those seeking funds place their “introductions”, they can wait for the replies to roll in.

On the other side, investors have a resource to learn about and evaluate new investment opportunities. They can sift through the possibilities, deciding where they would like to see their money grow. When they find a venture that interests them, they can make the contact, using the RaiseCapital.com system. The web site technology also allows investors to track all the contacts they have made, search for opportunities by geographic area, get industry e-mail alerts and create a watch list.

The web site design and business model uses the same logic to attract investors that restaurants and taverns use to attract ladies. Like females during ladies night at restaurants, investors are not charged anything at all to see the opportunities or make any contacts. Arguably, this pricing policy is designed to attract the more important part of the business opportunity-investor pair. The entrepreneur foots the bill but the price is reasonable. Richard Singer, CEO of RaiseCapital.com noted that, “RaiseCapital.com is a win-win situation for everyone involved. For less than the price of a daily latte, entrepreneurs get quality exposure to find the capital they need. Most start-ups or small businesses do not have a lot of money to spend on letting investors know they exist. RaiseCapital.com makes the whole process a lot less complicated.”

The web site makes it possible for individuals and businesses to market their investment opportunities in an efficient, cost effective manner. Investors can find dynamic local, regional or nationwide investment opportunities with ease, using the site’s database search tool.

A discerning entrepreneur might wonder whether the website will deliver what it promises. One potential criticism is that while the idea seems logical, investors have to know that the RaiseCapital.com web site exists and what it purports to provide. Word of mouth advertising may be important but it seems insufficient in attracting a critical mass of investors. To reach those people with money, the company uses what seems to be an effective communication approach. RaiseCapital.com stresses that it uses a comprehensive marketing strategy which is designed to reach millions of potential investors every month.

Members of RaiseCapital.com, translated as those who seek funds, will be exposed to a nationwide audience as a result of those marketing efforts. The company uses targeted publications such as Entrepreneur Magazine. The magazine has over 600,000 US subscribers. The readership demographics are impressive: every month, 2.4 million of the business decision-makers in the marketplace read Entrepreneur. Entrepreneur is published 12 times a year, and is available by subscription and on newsstands in the USA and Canada. RaiseCapital.com notes that it will have a full-page color ad in Entrepreneur Magazine beginning in the April 2007 issue. This review is being written in April 2007. Given the lead time needed for advertising placement in magazines, the copy must have been sent to the publisher months before. The point is that the web site is new and is just getting rolling so evidence of further advertising is not yet available.

The company also notes advertising placement in The Wall Street Journal’s online venture, Startupjournal.com. Content comes from the powerful editorial resources of The Wall Street Journal as well as from the Startupjournal.com editorial team and other key resources. Startupjournal.com is visited by entrepreneurs, small-business owners, venture capitalists and others who are seeking information on this business segment. The Dow Jones ownership positions the information as exclusive, credible and a cut above broad-based business-resource sites. Other communication alternatives include the National Venture Capital Association (NVCA), a trade association that represents the US venture capital industry. NVCA is a member-based organization, which consists of venture capital firms that manage pools of risk equity designated to be invested in high growth companies. The association has a membership of more than 450 leading venture capital firms, and is the venture capital and private equity community’s leading source for advocacy, professional development, networking and industry data. In this online environment, RaiseCapital.com runs a homepage banner advertiser.

How the site operates

Investors can visit the web site’s homepage and search for opportunities by industry, location in North America, by the capital amount desired, or by using a key word. We tried several searches and found a number of interesting and well described potential investments. We did not contact any of the investment seekers but saw the web site’s communication tools. They seem straightforward and easy to use. Potential investors may find the site a valuable introduction to possible partners. Of course, the site is no substitute for judgment and due diligence.

Overall comments

The RaiseCapital.com web site exploits the power and strengths of an online presence in a well designed way to reach its target audience. Its nature, an extension of the C2C personal introduction sites is a significant extension into the world of business. Its business model, free to investors, may promote visits and exposure for its customers who seek financing. Overall, it is a web site that breaks new ground. Time will tell if it succeeds.

In our next issue, we will investigate other informative sites and invite readers to submit their favorite internet sites for our consideration.

Reader requests

Please forward all requests to review innovative internet sites to: Dr Dennis Pitta, University of Baltimore, 1420 North Charles Street, Baltimore, MD 21201-5779, USA. Alternatively, please send e-mail to: dpitta@ubalt.edu for prompt attention.