Fundraise legally

BY MATTHEW D. MOHR

Many aspiring entrepreneurs seek initial funding for their enterprise by asking friends, neighbors and relatives to “invest” in their idea Sometimes the individual decides to take a formal approach to raising money from known local investors or angel investors. There are a number of regional angel investment funds which have been set up to provide sources of funds for new business ventures and help guide the business toward success Many aspiring entrepreneurs don’t realize raising money from external sources requires following ver y strict state and federal securities laws

I have been presented a variety of “private placement memorandums” by businesses hoping to secure funds, but even with various disclaimers and by copying other similar documents, these hopeful entrepreneurs often break a number of securities laws. Just because you write in a document which is intended for use only by knowledgeable and qualified people, it doesn’t mean you have a legally appropriate document.

Grand Forks, N D , has an active and strong angel investment fund comprised of a group of very astute individuals. At one meeting a person presented a formal business plan complete with a request for angel funding Everything seemed to be in order, but upon reflection one of the angel fund members pointed out a variety of security violations, so no investment was made In this case, had the entrepreneur hired a competent lawyer, his money would have been well spent and he probably would have the funding needed to launch his venture.

If you are ever approached by a person selling an idea for his great investment, read the information and check the proposal for its legality along with investigating the person to determine his legitimacy. There are a lot of expert confidence artists working hard to take your money

Raising money or investing in a venture is not generally easy, but it must be done legally, and with diligence. PB

Matthew D. Mohr CEO, Dacotah Paper Co. mmohr@dacotahpaper com