Raising Money Internationally
I get asked this question a lot: "Mr. Vijay, is it possible to raise money outside the US?" The simple answer is sure, however, you need to take into account this one element or it might get you into trouble.
HIGH EXPENSES COULD CAUSE ISSUES
I usually get this question from people who fall into one of two categories:
I have a friend or family member who lives outside the United States and would like to invest in my fund. I want to invest in a non-US fund. So, I tell them the same thing every time. They need to understand that there is an additional cost. For example, let's say you have a wealthy family living in the UK. They want to come to you and give you money for your fund here in the United States. This is good for you, but you have to sit back and see if it benefits you.
REMEMBER THE COSTS
First, you need to make sure that you are compliant with US securities regulations and the SEC. If you decide to go to a law firm, the minimum loan document that will satisfy the SEC without help is about $30,000. Through my program, I can help managers like you make that cost more reasonable. I can help you get down from $30,000 to $7000– $8,000. Your family lives in the UK, and you need to find a lawyer who understands both UK and US law. In addition, you have to pay taxes to UK investors, so you need an accountant who understands the tax laws of both countries. This doubled the required compliance and increased potential costs. However, there is a perfectly legal way to make this easier. But the beauty of it is that these costs can be used as a start-up tax credit for the fund. This can save a lot of tax and negatively impact the fund's net income. The last thing you want is to be negative!
"Rule #1: Never Lose Money.
Rule #2: Never Forget Rule 1. "
I have not been able to explain or justify to the current investor why there would be an additional cost if they could only attract one additional investor to the fund. You can probably only do this if the new investor is investing large sums of money or if there are multiple investors involved.
"Globalization" may be one of the options that attract entrepreneurs looking to make money outside their home country. This journey usually begins with a customer's order, a business opportunity, or an international connection.
Key challenges when raising funds abroad:
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Raising funds in a foreign country can be expensive. Some deals take longer to close. If you have to stay there to expedite the process, it can cost even more than trying at home.
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Foreign investors may not fully appreciate the potential of emerging markets and may perceive risks that are far higher than they are. For example, US investors want to invest primarily in US-incorporated start-ups because they are familiar with laws and tax rules but have less insight into current or upcoming EU regulations.
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When raising early-stage funding, angel investors want to see evidence of domestic success
Benefits from Overseas Investment:
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It helps a lot in understanding the market if the investor is from the local area or culture.
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Investors can assist with proper referrals to potential customers.
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Some markets, such as the United States, have better investment infrastructure and more capital available than others.