The message below is typical of one I have received many times.
Does anyone know of reliable sources of information about strategies to raise money abroad (i.e., outside of the U.S.) from individuals for companies that you have started? I have seen scattered references to the idea, but am looking for seasoned professionals or other reliable resources who can provide in-depth information on the subject. Thank you for your help. JE.”
Since I began my business by raising money aboard I have some experience in this area. However let me begin by assuring you that this approach in business is no panacea.
Investors abroad are just as informed as investors in the country where you live. Plus you encounter lingual and cultural differences, plus the added costs of dealing at a distance. If you have a decent business plan written in an intelligent way, you should be able to raise money at home easier than abroad. However there are some advantages to looking for investors abroad.
The first is that there will be times when times are economically tight locally, but going great guns elsewhere. In the past decade the hot spot has been the US, so Japanese (Japan has been in a great recession for a decade) businessmen may have benefited from raising money in the U.S.
There can also be some wonderful tax benefits from a U.S. point of view if you have a business that does business entirely outside the U.S
If such a business has 50% non U.S. shareholders it does not have any U.S. tax or reporting requirements. Business of this nature are deemed non-controlled by the IRS and can build up profits on a tax free basis. This means that U.S. business people can defer tax for long periods of time (assuming they take no salary or dividends from the business). This is one of the last true tax benefited areas that is not likely to be changed (the U.S. has a growing record trade deficit and has to encourage U.S. business people to do business abroad).
If it worries you giving up some control and half the profits of your company, consider what you give up to the IRS if you don't use this approach.
Let me hasten to add that you cannot hire some attorney to hold half your overseas business. The other shareholders have to be legitimate, real arms length investors who put up money and are taking risk.
There are two ways to raise such money abroad.
The first is through institutions (such as banks and brokers) etc. I am not experienced in this are and would direct you to some of our International eclub advisors such as Andy Kaegi in Switzerland, Barrie Martin in London, David Melnick in Toronto or Steve Rosberg in Argentina. They have enormous banking experience and may be able to put you in touch with the kinds of people you need in this area. This will generally only work for large companies with a track record. Institutions that make international loans are looking for substantial deals, not start ups. There needs to be some reasons why you are in London, Frankfurt, Tokyo etc. to raise the cash. The question will arise, why here? Why aren't you getting this money at home. So don't bother the eclub advisors if you have a small start up deal, no history, substantial business plan and no track record. The best start up venture capitalists are in the U.S.
The second way to raise money abroad is to go out ( as I did) and find private investors. This generally works best if they are attached to the business plan. IN other words if you have a product you want to sell in Germany and want German distributors, then look for German business people who can be distributors and shareholders at the same time. This is a very logical approach as you gain capital and someone who can really help you succeed in business.
I have an entire course on this subject (out of date) but will revive it if there is interest at our forum site, so I'll watch and see the response at the Real Business forum (go to https://www.garyascott.com/forum/forumdisplay.php?forumid=11 )
The most important reason (in my opinion) to use this approach is if you want the adventure of building an international business. Using private investors gives you a way to broaden your horizons with other investors. There are few ways to get to know people around the world as well as through a mutually shared business enterprise.
A great way to get started is right here at this site! Our readers are from all over the world so you can bounce our business ideas off investors from England, Australia, Canada, Sweden, and many many other countries right here. Make contacts, get introductions. This is where the net and this site can really excel. So let us know more about your business plan at the real business forum. Perhaps we can help you get started on this wonderful process.
I offer a business consulting (not financial planning) service and will be happy to look at your international business idea and help you create your business plan, find your partners and create and sell your product. The fee is US$749 for a 1.5 hour consultation. I need to see an outline of what you are doing before the consultation to decide whether it is worth your time and expense and to prepare my replies and contacts so I can really help you in the consultation. There is no fee to review the outline.
Life is an adventure and creating an overseas business is one of its most thrilling peaks, so have good investing and good business!