As a business attorney, certified transformational coach, social entrepreneur and finance innovator, Jenny Kassan has been helping mission-aligned entrepreneurs raise capital since 2006. Her book, “Raise Capital On Your Own Terms: How to Fund Your Business Without Selling Your Soul”, offers alternative capital-raising plans for businesses that want to make both profit and positive impact. Read on to learn more about her special formula for raising capital:
Tell us about yourself. What led you to the work you’re doing now?
I graduated from law school almost 25 years ago and started my career as a staff attorney and project manager at a community development nonprofit in Oakland, CA. While there, I worked on neighborhood commercial district revitalization, small business assistance, and developing a mixed use transit oriented real estate project.
After 11 years at the nonprofit, I was introduced to a securities lawyer who was starting a new boutique firm. His vision was to use existing securities laws to facilitate democratized impact investing. Even though I knew nothing about securities law, I joined the firm.
Over the next several years, I learned everything I could about the law governing private company investing. Because I was new to the field, I approached it with an open mind and learned that there were many ways to support healthy, sustainable fundraising for mission-driven businesses.
In 2015, I left the law firm to start my own company, Jenny Kassan Consulting, which provides legal services, coaching, and consulting to mission-driven entrepreneurs that want to raise funding on their own terms.
The first thing that caught our attention on your website is your ‘formula for mission-aligned capital raising’. Can you tell us more about this formula, and what elements contribute to it?
I have been helping entrepreneurs raise mission aligned capital since 2006. I highly recommend that any entrepreneur that wants to raise money from investors go through each of these six steps before starting to talk to investors!
- Get clear on your goals and values (your desired growth trajectory, your plans for exit, your non-negotiables, how much you want to raise, etc.)
- Identify your ideal investors
- Design your offering (i.e. create your term sheet)
- Choose your legal compliance strategy (anytime you raise money from investors you will have to comply with securities law – it’s best to choose your strategy before talking to investors so you don’t inadvertently break the law or close off options)
- Design your investor enrollment strategy (e.g. prepare investor materials, plan how you will reach out to investors, etc.)
- Create a plan for dealing with obstacles as they arise – I call this the mindset step – this is about preparing for the likelihood that limiting beliefs could get in your way during the fundraising process and having a plan for addressing that.
These are the six steps I cover in detail in my book.
In your experience, what are the biggest pitfalls that social enterprises fall into, and how can they avoid it?
I would say the number one biggest pitfall is not being thoughtful about the capital raising process and just jumping in to the path of least resistance. If you take the time to plan your strategy and go after investment that is the right fit for you, you will reach your fundraising goal faster and avoid the horror stories we hear about social enterprises bringing on the wrong investors.
Unfortunately, there is a lot of misinformation out there about what is possible when it comes to raising capital. Be sure to know all your options before choosing your path! Also, many entrepreneurs use off-the-shelf tools to try to save money. Not taking the time to design a strategy customized to your unique situation can be very costly in the long run!
Many people believe that VC money is the target when raising capital. What are other sources of funding that social enterprises should be aware of? What are other ways that investors can get paid so that founders can maintain control of their business?
VCs fund less than one percent of businesses and only 6.5% of the Inc. 500 have received VC funding. The belief that VC is the only source of funding is completely wrong and has caused many entrepreneurs to waste valuable time chasing the wrong money.
Half of the adults in our country are investors. I like to divide investors into two categories: professional and non-professional. Professional investors include VCs, active angel investors, fund managers, family offices, and the like. Everyone else is a non-professional investor – people who have investments but who do not spend much time thinking about investing. 99.7% of investors are non-professional investors. They control trillions of dollars. This is a huge source investment capital that most entrepreneurs overlook.
Non-professional investors are far more open to investment terms that are based on profit-sharing as opposed to the VC model which relies on fast growth and exits for investor returns. They also generally have no interest in coming in and taking control of your company.
You have a book, “Raise Capital On Your Own Terms: How to Fund Your Business Without Selling Your Soul”. What are the top lessons that readers can get from your book?
My book offers a practical step by step approach for creating a customized capital raising strategy. It includes chapters on the types of offerings you can make to investors (the options are infinite!) and how to comply with state and federal securities laws even if you want to include non-professional and non-wealthy investors.
How has being a part of SVC influenced your journey?
Being part of SVC has given me the opportunity to meet so many amazing entrepreneurial leaders, many of whom have forged their own path when it comes to bringing on investment capital.
I have also listened to leaders share stories about what happens when we’re not careful about our fundraising choices. In fact, I used a quote in my book from an SVC conference:
Us entrepreneurs don’t think nearly enough about the decision of who you get in bed with with the money. You put some real thought into who you partner with, but when it comes time to go get the money, you just want the money, and you’re so happy that someone believes in you that you take the money. It’s crazy. – Greg Steltenpohl, founder of Odwalla, Inc. (sold to Coca Cola)
I am so grateful for the SVC community’s willingness to share real stories, warts and all.
Find out more about Jenny and her book here.