Should You Raise Money from Small Investors? Should you raise money for your company a little bit at a time?
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Shortly after she launched Better Batter Gluten-Free Flour in Altoona, Penn., in 2006, Naomi Poe saw that to grow her business she needed an infusion of cash, as well as some wise counsel from experienced business owners. She asked two acquaintances whether they would be on her board of directors.
"At the time, I didn't know that, generally speaking, you don't ask people to be on the board unless they're vested in the company," she says.
But her prospective board members forked over $20,000 and $10,000, respectively, and they agreed to work with her to grow her fledgling business. That began a pattern of small cash infusions--ranging from $1,200 to $30,000 each--that helped her launch her company. Private companies can offer equity to as many as 35 private investors without their having to pass wealth or investment knowledge litmus tests, according to U.S. Securities and Exchange Commission guidelines.