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hi I'm Evan Carmichael welcome to an edition of ask Evan today we're going to answer a question from a newsletter reader Jay who's trying to raise money for his business and wanted some advice on how to structure it so it's a long email so I'll just kind of summarize it he has a new idea he has investors lined up and they're waiting for him to get back to them with a proposal of you know what to do he doesn't want to give up equity and he doesn't want to hire a lawyer to structure everything I wanted my advice and what to do so thanks for the question Jay I think it's a challenge a lot of entrepreneurs go through is how to structure deals to fund their business the three most common ways the first is to give up equity so you give a percentage of your business or the cash injection and sounds like that's not what you want to do so that's fine the second common way is just a straight loan so they give you X amount of dollars and you agree to pay it back over a period of time and then the third most common way is to have some kind of hybrid so that they have a loan where they're making a certain amount of money on a ongoing basis but it's convertible into shares so again you're giving up shares at some point in time some other companies will do a percentage of sales or percentage of the profit it's always better if you can to do it on on the profit side of things just because if you do in top-line you could end up paying off your investors and then not having any money left for yourself at the end of the day so that's not going to help a ongoing sustainable business there's a million ways to slice it you have to think what's in your own best interest when you're looking at these investors are the people who you want to have on side with you for a long period of time if you see them as as just giving you money then you probably don't want them to be a part of your equity and ownership structure so a loan would be better or some kind of profit-sharing which you have some kind of clause we will apply them out at a predetermined price that's always a great way to kind of get some money at the start without giving up too much of the farm and also being stuck with bad investors but ideally you can try to find people who can also help you out longer term and not just be a source of capital but can be a source of connections and customers and help you find partners and get you into the media and they start thinking about your business as a way for them to help you know contribute and not just give me money and in that sense it may be worth going out and giving up a piece of the business on the equity side even if it's a small piece just to make sure that they're you know always having your best interests in mind so those are the three most common ways if you want to do that kind of revenue share like you talked about on your email I would try to do it on a profit sharing side instead of the revenue so that you still are you know making sure you're making proper for your business I would probably though talk to a lawyer it's dangerous to structure these kinds of things without having a lawyer help you go through the process the more you know what you want to do so hopefully this video helps give you some ideas the closer you get to what you want to do the less time you have to spend with a lawyer if you go to Laura and say here's exactly how I want to structure it can you help me do it you won't pay as many legal fees as I'm not quite sure what I want to do can you help me then you know the billable hours start to add up but I definitely talk to the lawyer it also makes you look more professional a lot of the companies that we helped finance when I was in the venture capital business had really really messy shareholder agreements and it made it really difficult to be able to raise additional capital because it didn't do a property the first time so if you see this is something that's gonna be bigger down the line and be able to you know go and get more investors you need to make a lot of money with it makes sense to be able to do it right from the start so that when future investors are interested they see that it's kind of been done properly and they're not going to waste time fixing old mistakes so hopefully that helps if you guys liked the video please give it a thumbs up that makes me want to do more of these videos for you guys and if you have a question about raising capital or or comment on this video or another question about your your own business if you leave in comments below I always read those to try to respond as many as I can so thank you and we'll see you on the next episode you