Myth 2: You Must Have a Strong Network to Raise Capital
To connect with the ultra-wealthy, a strong network is indeed essential, but the investor landscape is much more diverse. In the United States, nearly 23 million millionaires actively seek investment opportunities, and they can be found everywhere.
During Uncle Nearest’s early years, I embraced a grassroots approach to building and financing our brand. I attended major spirits events, ran our booth, mingled at festivals, and introduced people to Uncle Nearest. Engaging in retail bottle signings and whiskey dinners, I made my presence widely felt. This hands-on approach involved inspiring and engaging potential investors, often leading to business card exchanges and investment offers.
Back at the office, I vetted each prospect. If they had a history of accredited investments, discussions were initiated through our CFO. Our investor group, the Sixth Man, is incredibly diverse, ranging from accredited investors earning just over $200,000 annually to multibillionaires. This diversity has been pivotal in Uncle Nearest’s growth.
Myth 3: Major Investments Come Only from Wealthy Investors
A common misconception in fundraising is that substantial investments come exclusively from wealthy investors like decamillionaires, centimillionaires, and billionaires. However, the landscape of investment opportunities is more diverse. To be classified as an accredited investor, one only needs an income greater than $200,000 for the past two years. While I set a minimum investment of $250,000 to join our cap table, it didn’t need to come from a single accredited investor. Groups of accredited investors could pool their resources into a Special Purpose Vehicle (SPV).
My introduction to SPVs came when my business attorney connected me with an investment banker who organized the first SPV to invest in Uncle Nearest. The SEC permits SPVs incorporated in the U.S. and raising $10 million or less to include up to 250 accredited investors. In my company, well over 170 investors, most part of SPVs, family offices, or family trusts, contribute to growing Uncle Nearest. Regardless of their group affiliation, I treat each individual as a Sixth Man, acknowledging their daily efforts through their influence and networks to help grow Uncle Nearest.
This approach significantly broadens the potential investor base, challenging the myth that only individual, high-net-worth investors can provide substantial capital. Understanding and leveraging these diverse investment channels were crucial in financing Uncle Nearest’s growth.
Myth 4: All Investors Demand Board Seats
I successfully raised over $70 million for Uncle Nearest, Inc. before appointing the first person to our board. This individual has been an enormous value add, proving to be an invaluable supporter throughout our journey. The spirits industry, lacking successful precedents set by people of color, required a different approach. I needed investors who understood this unique challenge and were willing to provide capital and support without demanding board seats. This approach allowed me to innovate and carve out a new path in an industry with rules not originally designed for someone like me.
These investors believed in my ability to navigate uncharted territory and transform challenges into opportunities. At one point, I considered adding a board member following a series raise at a valuation of $225 million, but one of our largest investors advised against it. She emphasized that the company’s success stemmed from its flexibility and lack of board interference. She recommended waiting until the right member could truly add value. When we later raised funds at a $450 million valuation, I knew exactly who to add to the board, and their contribution has been invaluable.
