HATTIE: (In the studio) Hi, I'm Hattie Bryant. Every few years since our first episode in 1994, we have done a special show about money. It is the one question we receive most often. 'Where do I find money to start or grow my business?'

Money is an equation that connects the past with the future. If the future of your business is private and limited, so is the money that is available to you.

If that future is public, well-defined and expansive, you may have many paths to other types of money.

Basically there are two types of money. My Own Money, we'll call MOM, and Other People's Money, OPM.

Most of us start and grow our companies depending solely on MOM. And there are two types, your personal assets and then the retained earnings generated by your business. Most owners use a creative mix of the two.

(Voiceover) Let's visit with Sohrab Vossoughi. He was tired of working for other people. After many discussions with his wife they sold their home and paid off all their debt. With just $400 in their bank account he quit his job and they lived on a shoestring, while he operated from their kitchen table.

SOHRAB: (Voiceover) We are a really a brand consultancy with our expertise in product development and developing brands in the domination of spaces. Anything you make, you put it back in the business, that's what I used to do. Just think for the first six months I didn't take a single dime out of the business. We had our saving, we got rid of the house, we went with one car, we did everything. You sacrifice. There's a saying back home in Persia that says, 'For one year you eat bread and just water.'

HATTIE: Bread and water.

SOHRAB: 'Then you can eat bread and butter for the next 10 years.' Meaning that you've got to really make things -- it's hard at the beginning. If you want to really make it you have to sacrifice.

HATTIE: Think long range, that's the mantra of successful small business owners. Ken Duncan quit a high paying position, sold his home and lived for three years in the bush of Australia. Among the Aboriginals he hunted for his own food and found beauty at every turn.

KEN DUNCAN: How could you be stressed about life when you're sitting there? I mean...

HATTIE: (Voiceover) Ken Duncan is founder of what today includes five galleries and a profitable web site that sell his amazing photograhic collections, a custom framing company, a publishing house and one of the most modern printing laboratories in the world.

KEN DUNCAN: But really my whole business started with me having a portfolio and a bag of prints, and I'd knock on doors. And, you know, people often say, `Well, how do you start?' And I say, `That's how you start. You just knock on doors.' And the thing is, out of those doors, you've got to realize it's all about numbers. One out of 10 is going to say yes, and the other nine are going to say things like, `For a photograph?' or 'You've got to be kidding.' But you can't take it personally.

HATTIE: There are so many others, Carol Schroeder founder of Orange Tree Imports went through college in three years so her parents gave her the cash they had saved for her fourth year. She used that cash to open her business.

Jose Navarro's father escaped Cuba with a life insurance policy worth $4,000. This cash was used to start up what is now the country's most productive chain of pharmacies.

JOSE NAVARRO: I worked in that store during the day time, my father worked at the store during the whole day. When I finished, I went home, ate. My wife cooked and then my wife and I would go to the store and stay there until the store closes.

HATTIE: So we have an 18 hour day.

JOSE: Yeah, it was from opening that store and closing this one.

GRACE TSUJIKAWA: I mean just the excitement of starting and getting into business...

HATTIE: (Voiceover) Grace Tsujikawa said she ate a lot of potatoes during her startup. Albert Black funded his business by working a full time night shift for 10 years while running his business during the day.

ALBERT BLACK: It works for me.

HATTIE: Some people with an idea for a business immediately begin thinking about using OPM, other people's money. Getting startup money from a bank is hard, but not impossible. Founder of Tires Plus, Tom Gegax and his partner, Don Gullet, did it. Where did the money come from to start the business?

TOM GEGAX: Well, we both worked for Shell Oil Company, so what we did was each take money from our profit sharing fund that, when we left them, came to us.

So I remember we had, it was $90,000 it took to get in business.

So we had a $60,000 loan and $30,000 was between us. And I had like $15,500 and he had $14,500, something like that.

Getting a loan was the toughest thing because we went to like 10 banks and we kept getting turned down. And I think bank number 9 when they turned us down, I said, 'Why?' They said, 'You don't have experience at running a business.' And I really blew a gasket on that. After such frustration, I said, "Well why do they need you? Why don't they just put the stuff in the computer and one of the dings is, 'If you haven't run a business before, don't even have us come in.'"

HATTIE: You're out.

TOM: Yeah. Just say no matter, how potentially qualified you are, you won't get it. I said just have this all be computerized, they really don't need you.

HATTIE: Well, where did you get the $60,000 if all the banks said no?

TOM: Well finally found one that would. We found one that would through an attorney that we were doing business -- some other attorney in the law firm was a kind of finance attorney. He was on the board of the bank, and if he believed in you -- which he believed in us, then he'd put in a good word to the board. And we got it that way.

HATTIE: So it was a character reference.

TOM: Yes.

HATTIE: An insider character reference.

TOM: Insider character reference, that's the truth.

HATTIE: You'll be happy to know that in 2000 when Tires Plus was generating $200 million in annual sales, Tom and Don sold to an international conglomerate for double digit millions. (Voiceover)

Pamela Rodgers borrowed money from her parents for the down payment on a GM dealership in Woodhaven, Michigan. That's other peoples money. GM has a program that allows dealers to buy in over time. So Pam put together two sources to make it happen and on top of that she was willing to invest in a location that had become known as an ugly duckling.

Editor's Note: This is a strange mixture of OPM and MOM. If Pamela did not pay the loan back, but gave her folks a piece of the company, it would become OPM. Even though it was not necessarily secured in a traditional sense with her own money, it was secured by her reputation and relations with her parents.

HATTIE: (Voiceover) A business for sale by an owner who will carry the financing was the perfect opportunity for Lupe Fraga.

LUPE: We make your business day easier.

HATTIE: (Voiceover) Is the slogan of Lupe's company, Tejas Office Products, which has been operating in Houston since 1961.

LUPE: I was practicing as an accountant and Jim Kindig who had an office supply company, was servicing this company and he came to me and he asked me if I was interested in going into the office supply business. So, being single and just having returned from the United States Army, serving in France, I said, 'Why not?' So I took the opportunity. He loaned me some money, co-signed the note at the bank. Had one delivery truck and one secretary and that started me out.

HATTIE: (Voiceover) Lupe sales have increased 40% over last year bringing the total to 7.5 million for the last 12 months. Many business owners look for and win venture capital or private placements.

ANDY WILSON: (Voiceover) There we go with a big splash.

HATTIE: When Andy Wilson was broke from investing every penny he had into his Boston Duck Tour launch, he was still a million dollars short, so he went looking for venture funding.

ANDY: I was desperate, you know, and I tried to get bank financing, and I tried to go to the SBA, you know, all that stuff--was gone. So in last desperation, I made phone calls. So I finally got a hold of this woman and--through a partner at an accounting firm, because I called him desperately.

I said, `You've got to help me find--.' He says, `Her name is Carrie McIndoe.' And he says,` Her name's all about what she is, Carrie 'Mac Can Do.''

I called my mom up, and I said--because I was broke--I said, `I need to borrow some money to fly some people out so I can get to the last step,' and that was in June, and by August, they had raised the money for me, $1 1/4 million.

And, you know, they had the contacts, I had the offering memorandum...

HATTIE: So explain to me an offering memorandum. What is it?

ANDY: An offering memorandum is a legal document that explains your business idea, how you're gonna execute it, your financial projections, the legal structure and it does it in such a way--and it also discloses all the risks. In other words, there are inherent risks in any business, you know.

I feel like a farmer. One of the risks was the weather. If it rained for an entire season, I'd go bankrupt, you know. So I had the logo on the front of my offering memorandum. You know, it's a big, thick book.

HATTIE: The little duck?

ANDY: And when I first showed her this, I showed her a picture of the skyline views from the Charles, and she says, `Andy, you're all wrong. It's not the logo.' And she put the picture of the views right here of Boston on the front of the thing.

And I was just telling you about these investors in Maryland.

I'd been going around because I'd never met half these people. And I said, `Why did you invest?' And they said, `We liked the idea, and we saw that picture on the front of the offering memorandum, and we were sold.'

He said, `We knew it would work.'

HATTIE: The famous American Chef, Thomas Keller, was flat broke when he found the location that is now his one-of-a-kind, white-tablecloth restaurant, The French Laundry. He pounded the pavement to find cash.

THOMAS KELLER: I said, `Listen, Bob, I really don't have any money. You know, I just started this olive oil company,' and, you know . . .

HATTIE: `Would you take a case of olive...'

THOMAS: `Would you do it on spec?' And he said, `Well, I won't do it on spec, but if you can raise $5,000 as a retainer, I'll do it.' So I said, `OK.' So I went out to all my credit card machines and started...

HATTIE: Oh, you mean ATMs? You went to the ATMs and got some cash?

THOMAS: ATMs and whatever, got some cash, and I gave him $5,000. And he did it all on spec. Now keep in mind also, once this process started, I needed to come up with money to...

HATTIE: Oh, my gosh.

THOMAS: I didn't even...

HATTIE: You haven't even started!

THOMAS: Right.

HATTIE: The $5,000's nothing!

THOMAS: I said, `I don't have any money, Don and Sally. But I'm gonna do this, really. Believe me.' And they had the confidence. They had the confidence that I was going to be able to pull it off. And I gave them $5,000.

HATTIE: From the ATM machines?

THOMAS: From the ATM machines, from my credit cards, yeah.

HATTIE: You spent this money and you still don't have any ownership yet.

THOMAS: Yeah. I still don't have any ownership. It was a big leap of faith for me. It was a big leap of faith for now the attorney. It was certainly a big leap of faith for the Schmidts, because they're going into a position where now they're gonna close their restaurant because they believe that I'm gonna buy it, and...

HATTIE: So they're going to lose opportunity.

THOMAS: They're going lose opportunity, they're going to lose revenues.

HATTIE: And you're going to cause them to lose that opportunity if you don't come through....

THOMAS: Yeah. But everybody believes that it's gonna happen. Nobody knows how long it's going to take, and nobody knew it was going to take 18 months. I mean, we had many dates where, you know, the deal....I was supposed to sign...

HATTIE: You missed them! You missed those dates!

THOMAS: And we'd come back to the Schmidts and say, `I'm close. This is happening, please...' bear with me and believe in me for another three months.' And Don and Sally said, `OK. You know, we'll believe in you.'

HATTIE: Do you think your failures, -- the one at 21 and then the one in Palm Beach, and then the one in New York -- did that teach you? Did that give you courage?

THOMAS: It gave me a lot of confidence, because I had been through it before. But I'd been through it with other people's money before, so that was a little easier. Fortunately, my attorney had a base group of people; he had done this for other restaurateurs. I started sending people to him. And, I sent him out to people that I had known -- Bob, Michael, my two initial contacts...

HATTIE: So the attorney went on your behalf.

THOMAS: The attorney went on my behalf. This was a few of his core group of people that he thought might invest in a restaurant: And I just started making cold calls to people. And I'd ask you...`Do you want to invest?' `No, I don't want to invest.' `Well, do you know somebody who would?' `Well, maybe this person,' and before you know it, you're talking to people that you don't even know. And you wake up in the morning, and you have a list of 10 people that you want to call, and sometimes I'd get through three of them.

Sometimes I would get through all 10 of them because it was a good day, and I had two people that wanted me to send them the prospectus. I'm not even--they're not even saying they want to invest, they're just saying, `OK, send me the document and let me take a look at it, and then call me back in...two or three weeks.''

HATTIE: Thomas, you're selling. You're selling.

THOMAS: I'm selling. Yeah.

HATTIE: You're not being a chef. You're not cooking, you're selling.

THOMAS: No. No. The bank gave us a real estate loan. The SBA gave us a business loan. And then the investors came up with the rest.

HATTIE: OK, so you have how many investors?

THOMAS: Forty-eight.

HATTIE: Forty-eight individual investors.

THOMAS: My philosophy there was to have a lot of investors investing a small amount of money. No one would lose a lot if the business went to failure, and no one could tell me what to do.

HATTIE: Growing your business is a very different story. Sometimes our visions of the future are bigger than our personal assets and our retained earnings. That's when some OPM, other people's money, has to come in.

HATTIE: Here's a bolt of lighting. To do business with bankers, learn to speak their language.

Tim Hennessey's Ekkwill has grown to be the world's largest producer and shipper of fresh water tropical fish distributing approximately 120 tons of livestock by air cargo every month.

TIM HENNESSEY: We paid off all our creditors.

HATTIE: The shrimp business.

TIM: The shrimp business. Right, and we put together a bunch of business plans and proposals to different venture capital companies and different investors and that type of thing. A lot of them -- I'm talking 12, 15 over some period of time. At this time Sherry and I were living in a parking lot up in Tampa. Our joint income that year was under $2400. What we were able to do, again we're pretty broke and we really didn't have any assets either, is put together a series of notes. We found a fish farm that was an old tropical fish farm. It wasn't very big but it had a good earnings record and it was a good small business for this one guy. But this time we had done lots of business plans and lots of proposals and we had experience in the aquatic farming industry. We knew how to raise some kinds of fish. So, we were able to put down. He wanted 20% down and owner finance the rest. Pretty standard deal. So the trouble is how to come up with a 20% down.

HATTIE: Yeah, when you're living in a parking lot. What banker's going to give you a loan when you're living in a parking lot.

TIM: And then there's working capital too it takes to get things going. So we're able to put together a series of 3 debt instruments, 3 notes that were secured by assets that came along with the farm that we had not purchased yet. So with a stroke of a pen we actually catered all these debt instruments at the same time and we were able to buy the farm with no cash. So we literally started the business with $5.

HATTIE: (Voiceover) Like Tim, Frank Jao, founder of Bridgecreek Development learned how to create the documentation the bankers need. To find a sample of the type of document the banker wanted him to prepare, Frank actually searched the bank's dumpster one night. He found one that had been approved, plugged in his own numbers and projections, and he got the loan. So you owned the land.

FRANK JAO: Right.

HATTIE: That's all you had though.

FRANK: Right. Right – even buying the land, I would still need a loan. Because $350,000 doesn't buy the land.

HATTIE: It wasn't enough. Okay - so what did you do?

FRANK: I approach a bank anyway. The bank basically told me that there isn't enough ingredients here that they can give me a loan of 3 million dollars.

HATTIE: So that is what you wanted? You wanted 3 million?

FRANK: Well that is what it takes to build.

HATTIE: That is what it took then – it takes more now – but that is what it took then.

FRANK: So I have to ask, 'Give me your list -- Give me your requirement list and I will go back and fulfill it. In one of the lists would be a feasibility study and a loan package. I found out that a feasibility study at that time – we could bring in a consultant to do them and pay them. So that solved the problem. Then we need to put a loan package together. A loan package normally being charged by the loan broker – back in those days – for a considerable amount of money. And I wasn't ready to do that and I couldn't even afford that. So I have to figure out a way that I have to do the loan package myself.

HATTIE: So how long did it take you then to go back to that same banker who told you no and say 'Okay, here's my stuff.' FRANK: About three weeks in total.

HATTIE: Three weeks. So now you have been in this country for five years, six years and you have just gotten a 3 million dollar loan.

FRANK: That was the first loan I ever had -- at the time. And it was just amazing - I couldn't believe it.

Editor's note: The link just above goes to Frank's story. We all need to ponder this man's story and the story of another Vietnamese refugee, Thanh Lam. There is no whimping, whining, or moaning; they are grateful for the basic freedoms to build their life without a government dictating how they should live. In 1975 Frank & Cathie Jao immigrated to this country from Vietnam with nothing. If this story doesn't inspire you to get the money, keep your job.

HATTIE: In the business world there are also angels. These angels provide either debt or equity capital. If it's debt capital, they may give you money quicker, sometimes cheaper and with fewer strings attached than a bank. If it's equity capital, they'll want a return on investment within a fixed period of time. Sometimes angels are moved by the type of product or service you are selling. We've known many who are recipients of angel funding.

Debra St. Claire found her angel by attending a convention.

(Voiceover) This is Debra St. Claire, the inventor of Organic Sweets and founder of the company, EcoNatural.

HATTIE: What is a socially responsible company?

DEBRA: It's a company that has a mission statement that keeps it in line with things that are good for the planet. So a socially responsible company -- let me just tell you how ours is socially responsible -- I use ingredients in my product that I feel comfortable giving to my own children. The base of our product, organic molasses granules, is better than refined white sugar. Again, you asked me about Altoids is different. They use white sugar. They use beef gelatin. I use organic molasses granules. It's a totally vegetarian product. So I made myself a niche in that respect. How could I be different with a strong powerful breath mint?

HATTIE: (Voiceover) Why did you invest in this company?

Angel Investor: There were several things that really were interesting. Number one, I came from a background -- my father was a chiropractor -- and we were raised on natural foods and that sort of thing, but the food always tasted awful. I was very excited about supporting a product that was good for you and also tasted good.

DEBRA: People who believe in you are very, very important, and to be able to tell your story in such a way that you can communicate that you're going to stay with it until it's done, is very important. And if you're not sure that you can do that, then don't take your investors in.

9

HATTIE: Fred Hoar and Hans Severins are in Silicon's Valley famous Band of Angels. They believe that the OPM angel supply is oxygen to entrepreneurship.

FRED HOAR: What's an angel? An angel is a person who will invest with his own money, makes his own decisions.

HATTIE: Why didn't you just do the conservative thing, buy IBM, General Motors?

FRED: But that isn't any fun Hattie.

HATTIE: It's boring.

FRED: It's boring.

HANS SEVERINS: People can come to us who might not be getting hearing or fair evaluation in their eyes from the venture community.

HATTIE: All right, so tell me how to prepare to come to you. Do I need a cool name like, Pretty Good Privacy. I mean that's a company you just invested in recently. Pretty Good Privacy.

HANS: Either you need a cool idea -- it would be nice if you have a discernibly cool management. It would be great if you had a measurably cool business plan with a reasonable prospect of becoming a leader in a growth market.

HATTIE: We've already done programs about the Small Corporate Offering Registration. Please read on our website about this process for taking your company public without going to Wall Street. But, if you want to go to Wall Street you can. Andy Murstien, small investment corporation, Medallion Financial, raised $50 million in its initial public offering.

ANDY MURSTEIN: Yeah. You need a good story. I mean, as funny as that sounds, you have to have a passion for what you do because people could see if you are serious about it and if you really have the heart to go out and grow your business.

So you need the passion. You need people to believe in you and to also share that passion. So, every cycle there's a different wave of companies that basically Wall Street becomes enamored with.

Again, it's jumping on the bandwagon when the timing is right. You could have the greatest company in the world, and if the timing's not right, you're not going to be able to raise money.

When we went public again, we raised $50 million. The next year we did not need the money but our stock had gone up 50% so everybody said it's a good time to go out and raise money. Sometimes banks and others lenders are willing to lend you money if times are good, if the economy's doing well; and even though you don't need it, take it, and reserve for a rainy day.

We did it again. Our stock had gone up 50%, so we went out and raised another $50 million because investors were clamoring for more of the stock and we gave it to them.

Then two years later we went out and raised a third launch of $50 million. We really didn't need the capital, but again the economy was good, and our stock was doing very well. So that's the time to go out and get a loan.

We bought 15 companies since you last saw us seven years ago. When you saw us last our portfolio was about $200 million. Today we manage over $600 million. So we just took the money and bought companies and lent it to small businesses.

HATTIE: So, what is money? It's an equation where the past reaches into the future. To start a business or grow the one you have, money can appear to be a huge obstacle. But you've just seen many creative, tenacious people who could see the future so clearly they were able to work with their own assets and make the inherent value of that money grow.

You must, however, have a great idea and as Andy Murstein said, 'A good story to tell.'

And, you have to have MOM, my own money. Then once you have that skin in the game, move on to OPM, other people's money.

There's a lot to go around. We'll see you next time.

The Closing of the Show