I spend today in the luxury of America’s flight travel industry. Let’s hear it for peanuts. On one leg of my flight I say next to a wonderful business executive from a health care company. He shared what he did. I shared what I did. We paused and let the flight attendant tell us the safety features of the plane.
After we got into the air and I had an opportunity to learn more about him I learned that despite his conservative presence he had just made a significant investment in a close life long friends start up business. He gave me the website, a brochure and told me everything he knew about it. It had nothing to do with the industry he was in. he was a powerful evangelist. I said he must know all of the risks of investing in a start up. His face got serious. “I know he said. But it is America, that is how we grow. And maybe we will get lucky and it will be a little extra for my retirement.”
I asked him if he used pre-tax retirement money to make the investment. “No” he said, that was the hard part he explained, they had to pull money out of their current savings. “Would it have been easier if you could had redirected some of your retirement savings to this venture?” I said. “Oh dear yes, we would have invested more” he said.
As we talked further and I explained that there was an option of a self-directed retirement account which would give him checkbook control over a portion of his
I expect tomorrow my client’s senior sales representative will be on the phone with him. Hopefully within 30 days we will be able to increase the percentage of ownership he has in his friend’s business.
I asked the question above because I wanted to know who else was doing this type of work. Instead I got three answers that didn’t answer the question, but told their opinions if why if should not be done. I appreciate those answers, thank you for taking the time to read and consider my question.
I appreciate their opinions. And I respectful disagree.
What is starving economic growth in this country is the frozen capital. Good job producing business are not getting the funding they deserve. The funding is dolled out in silly amounts to the same players with the same connections. (see color.com’s investment today) the venture capital firms systematically do a poor job of funding women, people of color, and those from rural or urban America.
Meanwhile millions of America’s have turned over our retirement to gucii shoe wearing BMW-driving Wall Street gamblers who get paid millions to move money in and out of financial “instruments” that no one -- even they-- can understand.
I cringe every time I open the statements they send me in the mail at how well my money has been managed over the last 15 years. I can do the math and see the time that it will take me to recover my retirement saving and allow me to realistically retire. And I know that simply putting sending money off to be gambles by the professionals is not going to do it. It is a matter of math.
Thank goodness there are alternatives.
Of course, I am not all that opinionated on the issue at all!
It is about balance. Balance of risk. Balance of reward. Going for our dreams. I believe that any person leading a capital raising campaign for a start-up, that is looking to raise the Friends and Family round, or even the Angel round of funding should make every reasonable tool available part of their toolbox.
They need to know about angel funding networks, and VC’s of course. They also need to know about grants and loans. they need to know about SBA. They need to know how to engage friends and family. One of the ways to do that -- is with self-direct retirement accounts.
I asked the question because I have a client who is successfully doing this. I would like to know of others -- so that they can network, improve the methodology together, build the capacity through collaboration and together become a strong resource for the economy building, job producing dream makers called start-ups!
