Know the Rules to Get Risk Capital
By
William Cate
Are you looking for investment money? I HAVE money to invest. I run a Venture Capital Club [
http://home.earthlink.net/~beowulfinvestments/globalvillageinvestmentclubwelcome/] whose members want to invest in your company, if you'll play by our rules. I'll come back to our investment in your company in a few moments.
If you're planning to go public, do it from offshore. I'll repeat that. If you're planning to go public, do it from offshore.
Why do it from offshore?
#1, It's cheaper.
#2, You increase your chances of actually having your company's shares trade
from 50/50 to 90/10.
#3, You are now set to do business in the Global Village.
#4, You will legally decrease your taxes enormously.
Let me give you some hard facts.
If you go public in the US via an IPO, you will spend, out of pocket, between $1,500,000 and $2,225,000. It takes an average of 18 months to get an "Effective Letter" so that you can begin trading. The odds of seeing your company's shares trade are about even, i.e., 50/50. If they don't trade, the merchant bankers and brokerage houses will walk away from you. If you DO trade, but poorly, the merchant bankers and brokerage houses will walk away from you. If your company trades, your underwriter will want at least 18% of your IPO funds. The traditional going public formula works well for Market Professionals, but not nearly as well for your company and the public.
If you go public in the US via a reverse merger, it will cost you less to begin with and you will be trading. In the end, however, it will cost probably $5,000,000 and you'll sacrifice the future of your company. Why do I say that? Because you'll have to spend a lot of money buying out the shares owned by the previous insiders. They'll be selling those shares into your best efforts to raise your share price. Then you'll have to spend another fortune supporting those shares and finding other buyers for them. The obligation to find buyers for your public company's float is never ending. It's the primary reasons public companies go private. Reverse mergers are the fastest way to go broke ever invented.
Another hard fact: 98% of all companies which go public on the Over-the-Counter Bulletin Board are out of business in five years or less. That's 98%. Those are the kinds of lousy odds you get playing the slots in Las Vegas and Atlantic City. If you desire to run your business as a gamble, it's a perfect way to go. You may have fun. Your insiders may pocket some of the public's money. But, your company is likely to go broke.
Not a pretty picture is it?
There is only one good reason to go public. You'll use your publicly traded shares to buy cash producing assets and build a hundred million-dollar company. I'll repeat that. You must use your shares as money to buy cash-producing assets.
Your insiders can't dump their stock on the public.
Your private placement investors must limit their sales to recovering their risk capital.
Your must bury your float and ensure the public profits from buying your stock.
You must create and maintain a strong share price with the least possible Investor Relations costs.
This isn't going to be easy. But, it must be done.
If you don't agree with the multinational corporation goal, I won't risk money on your company. I'll advise you about the obstacles on the road to being a public company. I'll help you find solutions to these problems. I've been doing it for nearly a quarter century. I know the game and it's risks. I know the ways to beat those who will be playing against you in the American Market. But, my friends and I won't risk money on your public company's shooting star.
Nevertheless, as I said at the beginning, I HAVE money to invest.
If the odds were as poor as I say they are, WHY would anyone invest in a public company?
The answer is simple. The Going Global concept is a better way to do it.
Why do I think I'm so smart? I don't. One major company has already done it and built themselves into a $50 billion dollar international firm. Does the name CISCO Systems ring any bells?
If you have a product or service which will work well in the Global Village - by that I mean it can be sold in many countries, I will invest in your company. But you have to do it my way. I'm the one taking the risk. I set the rules.
Do I want to run your company? No.
Do I want to even control your company? No.
Do I want to serve on your company's Board of Directors? No.
That's correct. You will continue to control your company and hold the majority of the shares in your firm. I have a different way to "venture" my capital and to restrict risk.
If you run your company well, I'll show you how to become a $100,000,000 company in five to seven years and sell out to a larger company. The insiders will retire with over $200,000,000. It's legal. It's safe. And you'll probably have a heck of a good time doing it.
Does a Going Global concept interest you? Visit: [
http://home.earthlink.net/~beowulfinvestments/] Order a copy of Venture Capital Profits. It's the game plan for Multinational Corporations. If you want to play by my rules, these are my rules. With my rules comes my money and that of the members of the Global Village Investment Club [
http://home.earthlink.net/~beowulfinvestments/globalvillageinvestmentclubwelcome/]
Do you want to join everyone else and take the public's money and run? Is a "liquidity event" vital to you and your insiders? If so, I can tell you how to do it, legally. It's your choice. Use my experience and adopt the traditional goals recommended by attorneys, accounts and stockbrokers. You'll get my market experience to make the system work for you. But, you won't get my money.
Author's Note: This article evolved from a lecture that I recently gave to a luncheon meeting of CFOs in the San Francisco Bay Area.
About the Author
He has been the Managing Director of Beowulf Investments [
http://home.earthlink.net/~beowulfinvestments/] since 1981 and is the Executive Director of the Global Village Investment Club [
http://home.earthlink.net/~beowulfinvestments/globalvillageinvestmentclubwelcome/]
