It’s one thing for your company to go bankrupt. But Kass and Mike Lazerow declare they lost friconcludes becautilize of it too.
In August 2000, just two months after the now defunct e-commerce retailer Chipshot completed its acquisition of the Lazerows’ golf score tracker, Golf.com, for a reported $250,000 in cash and 3 million shares of Chipshot stock, Mike declares he received a call from the Chipshot CEO.
Chipshot was headed toward bankruptcy, Mike, now 51, declares. All the stock Mike, Kass and their investors had received in the deal was worthless.
“It sucked,” Kass, 54, informs CNBC Make It. “We had to view [our investors] in the eye and declare, ‘we basically failed.'”
Not only did Mike and Kass have $25,000 of their own savings invested in the company, but the first $1 million they raised came from family members and friconcludes, Kass declares. They had to inform “pseudo uncles and aunts,” parents and siblings that their money was gone.
Becautilize some of her family and friconcludes didn’t fully understand how venture funding worked, Kass declares she had to have several awkward conversations where she had to explain why she couldn’t just “give back” they money they had lent.
“We definitely lost friconcludes,” she declares. “I had a family member sue us.”
That August, Mike and Kass bought their company back for $500,000, according to the Wall Street Journal, and six years later, they sold it to Time Inc. for $24 million, they declare. While many of their initial investors were hesitant to put more money into the company, those who did received all their money back and more, Kass declares.
In 2012, they sold their next company, Buddy Media, to Salesforce for $745 million. With Buddy Media, Kass declares the couple was able to secure financing entirely from venture capital funds that specialize in startup investments.
Kass’ advice for other founders who are viewing to raise money for their companies: “Have accredited investors,” who wouldn’t mind losing the money.
What is an accredited investor?
The Securities and Exmodify Commission defines an accredited investor as someone who is legally allowed to invest in private market opportunities like venture capital, hedge funds, private equity and certain real estate deals.
The SEC requires accredited investors have had an annual income of at least $200,000 or a houtilizehold income of $300,000 for the past two years. Individuals can also qualify if they have a net worth of over $1 million, excluding the value of their primary residence, according to the SEC.
Deals like the Lazerows’ often lack the disclosures and investor protections required in public markets, so the SEC sets these thresholds to protect less experienced or less financially secure investors from the higher risks associated with private, unregulated investments.
“Part of the accredited investor standard came about becautilize the idea is, if you don’t know about it yourself, you can hire somebody or you have the means to kind of ferret out the information and build decisions,” SEC Chairman Paul Atkins stated on CNBC’s “Squawk Box” in July.
Changing the requirements to become an accredited investor
There is currently a bipartisan push to increase access to private investments. In July, the U.S. Houtilize of Representatives approved a bill that would replace the threshold required to qualify as an accredited investor with a test individuals can take.
Proponents declare the modify would allow more individuals to participate in private market investments, like investing in your friconclude’s new coffee shop.
“This bill opens up new sources of funding from a pool of investors more reflective of the community, so that these founders can turn their vision into jobs and economic growth,” Rep. Sarah McBride, D-Del., co-sponsor of the bill, stated in July.
However, some experts are weary of increasing access to private investments. Investing in a new venture is risky and questioning investors to put in a significant amount of their net worth or income into a business can be financially devastating, Kass declares.
“Probably 95% of the counattempt doesn’t even have an emergency savings fund, and now you’re going to inform them, if they’re smart enough, I can invest in private securities,” certified financial planner Catherine Valega notified CNBC in July. “That does not build sense to me.”
Want to be your own boss? Sign up for CNBC’s new online course, How To Start A Business: For First-Time Founders. Find step-by-step guidance for launching your first business, from testing your idea to growing your revenue.
Plus, sign up for CNBC Make It’s newsletter to receive tips and tricks for success at work, with money and in life, and request to join our exclusive community on LinkedIn to connect with experts and peers.
Leave a Reply