Do you need a Map to Money?

You can draw your map on a small piece of paper ...

Check out my awesome new client: They build supercars.

So while I’m out driving some Lotus Type 62s and having a little fun for once, I took my eye off the business and then …

My bank failed over the weekend.

First Republic Bank has been a part of my life for well over a decade and it’s been a great business partner.

Fortunately, I’m in good shape through this banking drama with some emergency back-up accounts. But with JP Morgan agreeing to buyout First Republic, it definitely makes me think a little more deeply about where money comes from:

“IF BANKS CAN GET MONEY AT .01%, THEN WHY DO I HAVE TO PAY 14% FOR IT …(OR GIVE UP 30% OF MY COMPANY TO VENTURE INVESTORS)?”

All this had me thinking a lot about money this weekend and how fortunate I’ve been over the years because I’ve built my own “Map to Money”... where I know

  • where money for my business comes from

  • how to go find it

  • what that money wants by way of risk & return

  • and what my ‘cost of capital’ will be

Because, keep in mind, the cost of capital is totally different for different people, which seems extremely unfair. 

Milk shouldn’t cost $4 for me, but $13 for you, and $0 for Jamie Dimon, but when it comes to money, that’s just how it works.

For example, I’m currently raising $5m for one of my portfolio companies, “OK Stone Engineering, Inc.”

My “cost of capital” is a 9% dilution of the company (but I’m keeping all the board seats and the voting rights.)

By comparison, one of my clients is raising money for their company that is at the same stage, and it’s costing them 22% of the company and they’re giving away voting rights and a board seat.

What’s the difference?

We’re getting money from different sources and through different channels, using a different offer.

And I think my choices are better in all three areas. The proof? My cost of capital is much lower

If you have a Map to Money, you can literally choose who you want money from (VC, PE, HNW, FAM OFF, BANK, PUBLIC etc).

In an increasingly uncertain world, I want you to have a Map to Money you can use to dial-for-dollars as efficiently as possible.

That’s why today’s issue of Pitch Anything Playbook is to do a high-level walk-through of the Map to Money and to create your own.

Let’s get into it.

You Can Literally Draw Your ‘Map To Money’ On A Napkin

You’ve probably heard many times that a great idea or even a business plan should be able to fit on a napkin.

I like to write on the back of envelopes with a big fat permanent marker.

Your Map to Money has 3 core parts to it:

First, what is your financial target or what bankers call “the capital sources”…

This is both the amount of money you want to raise and what you want to use it for. It doesn’t matter if it’s $50,000 or $5m, write it down.

Next, write down all the channels that you can source money and working capital from:

My advice here is don’t leave anything out. Throw all possibilities on the paper. For example, maybe you don’t think Friends or Family are viable channels for you… but once you start talking up your project, I bet your friends will get interested in it. The point is, start thinking about source of capital as “channels”

Here’s a list of the channels that I use to get you started…

  • HNW / High Net Worth (rich people),

  • Previous Investors,

  • banks/lenders,

  • Crazy Rich Guys

  • My newsletter readers

  • Wealth Management FIrms (RIA)

  • Family Offices

Then list your targets. These are the actual people you know in those channels… I wrote my list free-form, and I know there’s way more than $5m in these connections

Here’s where you dig a little deeper into those channels and list everyone you know that fits into one of them. The goal here is to create a list of people you can reach out to and ultimately make a pitch for your investment opportunity.

Here’s what my whole Map to Money looks like for $5m by June 30th:

Notice that middle section:

That’s the security I’m offering investors.

The arrows show which of my investor channels are most likely to be interested in that offering.

“But Oren, I don’t like the idea of asking friends, family and business contacts for money!”

Well just suck it up, buttercup.

Here’s the harsh truth…

If you’re trying to raise $1M or less – and especially if this is the first time you’ve raised money – we call this the “people you already know” round because that’s where you’re most likely to find people willing to take a risk on you.

I’ll explain risk vs reward and how it factors into your Map to Money and your capital raising efforts in a future email.

For now, pull out that envelope and create your own map to money:

  • How much (and for what use)

  • Which channels you have open to you

  • Who do you know in those channels

  • What security are you offering

  • Then focus on which channel you should enter - where there is the highest demand for the risk/reward and type of deal you have.

Done?

Then reply to this email with a picture of your Map to Money and I may pull yours to comment on, with your permission, or even respond to you directly.

Oren

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