Growing Firm Capital Through Investors

I have had many conversations with design firm leaders who lament that they could accomplish so much more if they had additional capital. In that same breath, they often mention their frustration with the fact that, even when the economy is strong, their profit margins do not allow them to invest in doing more. It is time to change this dynamic and look for other ways to both fund good design and simultaneously prove that it is a good investment. How? By attracting investors to invest in your firm, a project, or a research area in which you are interested.

You may be thinking: How many sharks or venture capitalists would be interested in investing in a professional services firm? Honestly, it is not a large number. However, the entire pool of potential investors is not just comprised of venture capitalists. It includes really any individual with an interest in making an investment. Considering that, a firm has a tremendous opportunity to raise capital.

I recently viewed a webinar by Jenny Kassan, an entrepreneur and business attorney with more than two decades of experience helping clients raise millions of dollars. Her client list includes service firms such as ArtSpark, CivImpact Labs, Hivequest, The Democracy Collaborative, and SVT Group. She strongly affirms that any business, large or small, startup or established, is capable of raising capital through an investment offering. Many of the offers that she has worked with clients to create allow them to stay in complete control of the company and keep their investors happy with small, steady returns over time.

How much can you raise? As of May 16, 2016, the JOBS Act created a path supporting crowdfunding as a method for organizations to raise up to $1 million as well as a provision (Title III) that makes it possible to raise unlimited funds from accredited investors. Since then, platforms such as WeFunder have come online, giving startups and small businesses a hassle-free mechanism to raise anywhere from $20,000 to $5 million by giving investors the opportunities to invest in companies that they care about and believe in, whether it is a mom-and-pop business or something larger.

An example of a design firm investor The Charrette Venture Group (CVG) launched in 2014, offering the first architecture business plan competition. CVG was founded by Matt Ostanik, an architect, entrepreneur, and business leader who had started and sold a construction software company, Submittal Exchange. He was looking for new ways to provide additional resources to architecture firms in a manner similar to incubators providing resources for tech firms. To date, CVG has invested in seven different firms and is now raising additional funds from interested investors. The CVG payback model is based on a percentage of revenues as opposed to an equity stake in the business.

Crowdfunding as a platform for real estate investment continues to grow. A recent study from Cambridge Judge Business School estimated that $484 million was raised for real estate investment in the Americas in 2015. More than 125 real estate crowdfunding sites are based in the U.S., including RealtyShares, Fundrise, Realty Mogul, and Patch of Land. Investment offerings fall under the categories of equity, debt, and Real Estate Investment Trusts, or REITs, for those interested in diversifying their investments over a portfolio of properties. Within these categories, there are many different offerings that one can make to potential investors. For instance, an offering can allow for small growth over time without losing any control of the company or requiring its sale in order for investors to exit.

To create a successful investment opportunity and attract the right individuals, the firm must present a clear picture of its mission and values, the goals that it is striving to reach, as well as an ability to articulate how additional capital would support meeting those goals. Then, consider getting an opinion from a business attorney. Even with some of the tools listed above, raising money from investors is a highly regulated undertaking with complicated laws at both the state and federal levels. A good business attorney will be able to understand the various legal compliance strategies and work with you to create a plan that is unique to your company and its fundraising goals.

Good design is a good investment, and we have known this for a long time. Let’s give individuals the opportunity to join us as investors and prove once and for all that good design is good for everyone. 

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This article was originally published in Contract Magazine.