Pt 3 – Raising Money For My New Company – How it ended up

This is Part 3 in my adventure in raising money for my new company – The PAR Program.  If you missed the other parts you can see Part 1 (preparation) here and Part 2 (pitching) here.

The great (but not the interesting part of the story)  is I raised almost $600,000.00.  I will refer to it as 600k just rounding up in this as reference to make the numbers easier.  Now where and how I raised the money IS the big surprise.

In pitching to VC’s / Angels – the question I always got was, “You have money why do you need investment”.  I had a good canned response to that,  but it wasn’t well received.  The real reason I was trying to raise money to bring more to the table than money.  Money wasn’t the issue to make this company work…  it was the connections and experience that came with it.  Unfortunately that didn’t turn out well for me.  I have no doubt this company will be the biggest startup success story ever to come out of Nebraska… and I wanted to take a local Nebraska VC/Angel company a long for that ride.  I thought my past companies sold and successes mixed with the fact I have never lost money in 13 years should have been a no brainer.  I was really out of my league and comfort zone pitching and to be bluntly honest just very ignorant on how the process works.  I cover that much more in detail in my post about that journey.

I have been told that reads like sour grapes… well it should.  I was deeply disappointed and frustrated with not being able to raise money locally.  Even though I have a lot of connections at major firms in Silicon Valley,  I had no interest or time to to do so.

You know how they say its always darkest before the dawn?  Well, for one thats is BS because its darkest at midnight but there definitely was a very empty, dark, feeling.   For a brief time I felt something I had never felt before.  A bit of hopelessness.   Even though we are doing great financially the company was not growing at near the pace I wanted it to and I was very worried without the right people in place that would allow me to do what I am good at (marketing/bizdev/development strategy) the growth was not going to be acceptable.

Mix that in with the huge overhead,  payroll, trying to manage people (which I have come to learn I am the worst at), and the rest of the stuff… well it felt for the first time in a decade I was actually “working” again and looking forward to 5pm everyday.

And then the dawn came:

Back before I initially started pitching for money we applied for the company to get accredited in the Nebraska Angel Tax Credit program.  This program,  if approved for your startup, allows investors to get a 40% refundable tax credit on the investment they make.  To put it into perspective if you invested $500,000.00 in my company by the end of 2014 and met the criteria you would get a $200,000.00 refund from the state of Nebraska when you filed your taxes next spring.  Being its a refundable tax credit, its not a credit to future taxes, its an actual lump sum check.  AND of course you still have the full investment.  You just only have 60% of your investment at risk.  Pretty badass right?

Just after my last pitch,  and coming to the realization funding from a VC/Angel firm wasn’t going to happen,  we received notification that the PAR Program was approved for this.

Total game changer as far as raising money… As you can imagine,  after word got out, all of a sudden everyone wants in.  Why not?  Where you going to get a 40% return on your money in a couple months and still have the full equity?

Of course,  the first thing that hit me was if I was qualified to do this myself.   After my lawyer, accountant, and the head of the state tax credit program went through all of our records for the new company, they concluded, that I did indeed qualify to invest in my own company and get the 40% return.   On May 25th I made the investment.  A week later I got a certificate to file with my state taxes next year for a refund of 230 some thousand dollars.

I still have reservations about posting this publicly.  Lets put our cards on the table. I am the guy that has publicly, hell PROUDLY,  disclosed that I attribute a lot of my success due to the fact I am not afraid to take angles and push the limits morally, ethically, and sometimes legally.  I don’t want this to come off like I am gaming the system.  Its far from that.

This is dealing with the IRS…  its a lot different than coming up with interesting ways to get affiliate commissions for ringtones, acai berries, dating leads, or various other things I have done in the past.

Everything was done 100% correct with lots of meetings between accountants, lawyers, and representatives from the state.  I racked up well over 20k in fees just making sure all was done right. There is a lot of oversight and many hoops to jump through otherwise the state can come back and collect that refund.

I don’t want this to come off like its a “loophole” or the “rich get richer” program.   In fact,  among many other things,  I can’t/won’t take a salary, distribution or any sort of income from this company for a very long time.   It could be years.  I do have income from the blog and other entities, products, consulting whatever so its not like my kids won’t eat =P.

Immediately that capital has been put to work.  Not only bringing on staff with the agency side of the PAR Program, but hired 2 more developers, and a few other people to build out the self service platform that will be launching early fall if not sooner.  In total I have hired 4 people, 3 of which were unemployed,  so far.  And we are looking for more people.   I started creating jobs in Nebraska and will create many more in the coming months.  That is what this program is all about.

I also have found 3 high level seasoned people to come on board as our CEO, CIO, and  marketing ninja, with very proven track records.  Since coming on board in those roles they have fairly seamlessly integrated in managing my existing staff and development team which in turn has allowed me to do what I love and am the best at.  Its been a while since I have been this happy.

With this capital I was able to bring them in and they are better and have more experience than anyone that could have come with VC money.  Mix that with the fact they have already built a couple multi million dollar SAAS platforms in our industry… its all coming together.  I will announce who they are when we launch… You might recognize their names but for sure know the company they previously founded.

The Nebraska Angel Tax Credit program was created primarily for job growth by giving investors an incentive to invest in something they might be on the fence about or otherwise wouldn’t by mitigating their financial risk.   I knew what I had to do, but without getting this or other investment money,  I am not sure it would have happen.  Well it would have happen but it would not have had the growth rate that I find acceptable.  It is an amazing program and the people that run it are amazing to deal with.  If you have a new startup in Nebraska or looking to invest in one,  I can’t recommend enough that you look into it.

If I haven’t drilled it home enough I just want to again emphasize that I have to keep the investment in the company for 3 years and with a LOT of hoops and oversight going forward.  The 600k was money I had to liquidate from other investments and the capital is already going to work pretty hardcore.

Also incase you missed it – We are holding a contest right now to help name the new self service side of the company.   If we go with your suggestion I will not only pay you $1,000 cash but you will also get a shirt that says “I named X”.   There is also a place where you can enter to be a beta tester which is a big opportunity not only with all the benefits but also you will help play a big role in ironing out any bugs and helping us with new features or suggestions.

Go here if you haven’t to sign up for the contest or the beta program.