had to take some steps to make sure they asked for the right amount. and these entrepreneurs didn't want funding. they sunk a little cash to start up what's known as an ultra light. want to know how to attract investors and get the capital you need? find out next on a special funding edition of "your business." small businesses are

revitalizing the economy and american express open is here to help. that's why we're proud to present "your business" on msnbc. hi there, everyone. i'm j.j. ramberg. welcome to "your business." today is a very exciting show here at "your business" because it marks the eighth anniversary. we're kicking off our new season by devoting the entire show today to a topic we get so many questions on. funding for your small business. that's why we're going to introduce you to the founders of a company that needed some cash. rather than asking for as much money as possible, these entrepreneurs thought long and hard about the best way to grow

their business. ♪ every girl crazy about a sharp dressed man ♪ >> you need to be very clear about what you're going to do with the money. it's important to know yourself, what your needs are. >> they know a thing or two about looking for investors. >> some of the hardest decisions were should we go with this investor or this other investor and who is going to make the better partner for us in the long run? >> ultimately, what are the goals for the funding? >> as they discovered, raising capital for their online business can be a full-time job. >> between doing that and running a business, it certainly -- it doesn't matter if you raise $2 million, $20 million or $200 million. it's just a long process. >> the founders of luxury men's shirt maker ledbury have closed on two rounds of funding for their four-year-old company. >> people loving the product and coming back. 65% of our customers come back between two and 35 times a year.

>> the first round was for $32,000. >> rather than going to one or tw individuals, we actually prednisone it out among probably 28 initial investors. >> it quickly became clear that these entrepreneurs would need a cash infusion to expand the way they wanted. >> probably about the 12 month to 16-month mark. it was sort of the nature of the beast. >> before committing to the process, they considered these questions to make sure ledbury was ready to try new expansion strategies. >> what are the lessons we need to learn now? how much money do we need to raise to learn those lessons to scale up and grow the business forward? >> with revenue up 200% and the addition of a small retail space, they need decided to go for it. >> we had the track record running for about two years, proven that the model worked. >> the hope was to land $2 million. >> we said, let's raise enough money to be able to really test

these thing that is we think are going to work to grow the business and scale it, but not have enough money that the mistakes are going to be really expensive. >> the pair had three goals in mind. at the top of their wish list was more inventory. >> to have shirts to be able to sell shirt. >> bumped up our inventory by two that we could grow 30%, 40% immediately off that supply. >> a consultant agreed that, based on demand, there was definitely room for improvement. >> said you're missing this many sales because you're out of stock this much. you need more inventory. >> with sales going up, ledbury needed a larger staff. >> we've outgrown the two of us and the couple other staff members we had. we needed to go out and get a few specialist sfwls one area of concern was customer service where employees were multitasking. >> we did a fulfillment here. they would be answering phones

and the other day they would be packing boxes, trying to get ready for the fedex guy. >> promoting the ledbury brand beyond word of mouth. >> going out and getting your own customers, creating a strong digital marketing strategy for us to say, hey, we're here. we make great shirts. try them and you'll see. >> the order of their pitch was deliberate. >> not only were we raising money to address these three pillars, we're doing it in that order. >> and ledbury's business plan was being updated and improved. >> you're sharing your dream, insides and inner workings of your company with other people who are smart enough to help you out. >> not every investor said yes. >> one or two people did say no. timing wasn't right. it wasn't right for them at the right time. we still gained a lot of value from all those conversations. >> it helped that they knew what

type of partner they wanted. any relationship had to be about more than just money. >> if you are in need of funding, but also in need of a little industry expertise, probably want that person that has some background and can sort of show you the ropes. >> after months of pitching, and with commitments from both old and new investors, the $2 million goal was met. they didn't want more than that either. >> it's always nice to be able to look at the bank account and say it's nice to see a good hefty amount of cash there. but i think what it is really allowed us to do is keep very focused on what we're aiming to do. >> most notable difference so far has been the inventory. >> 25% of the money we raised into beefing up our inventory, going deeper and wider. and we saw an immediate bump out of that, without putting too much risk out there. >> customer service reps no longer had to fill orders. >> we were able to outsource to

a third party that is locally here in town and that's just enabled the people who should be focusing on customers to focus on customers. >> one catch has been the marketing strategy. >> there's no silver bullet but how do we get in front of more of those people? >> it's a work in progress. >> people are still trying to figure out exactly how to get that equation right. hoump are you willing to spend to go out and acquire customers, facebook advertising or google advertising? >> the pair has accomplished a great deal of what they've set out to do. it sounds like they may already be thinking about the next round of funding. >> able to test a lot of strategies and build a strong team if we do decide to go out -- put it in the right places to make it work. the folks at ledbury teach us an important lesson, knowing

how much asked for is a very important factor in actually obtaining that money, particularly in later rounds. we have a great panel to deal with this investment issue. brad harrison is the founder and managing partner of scout ventures, venture capital firm focused on great ideas in entertainment, media and technology. and christian anderson is president of ka plus a, co-founder of gravity ventures. great to see you. >> good to see all of you. >> there were so many interesting points in that piece about getting money. one that really stuck out to me was the order of the way they present things to their investors. so that they said, first, we're going to use this for inventory, which is a shoo-in. give us your money and for sure you'll get money back. do you think that was the right order? >> interesting scenario, that business was already spun up and had proven out the model. people were buying the shirts.

there was a market for it. this is a really easy ask to make of investors. we've launched the business. people love it. look at the trend line. we want to sell them more stuff. help us do that. we're going to use those dollars and cents for inventory. >> they were really specific about how they used the money. do you expect them to be that specific when people come to you, brad, or is it kind of i tust you, you're smart, i know you're going to do a good job with the money we give you? >> we hope that everybody is smart and we can trust them. that's the first thing in picking entrepreneurs. i think you need to know where they're going to use their money. if they haven't shown to you that they have a well thought-out plan around product investment, inventory, marketing, whatever it is, then you don't know how they're going to allocate the capital and it's not as easy of an investment decision. when you see they have a well thought out plan, okay, i understand they have the data from the initial product launch,

we can now scale the business. that's what they're really selling. >> that well thought out plan can have branches. we're going to use our money for this if it doesn't work, we're going to move our money to this? >> absolutely. if they don't have flexibility -- it's important for these folks, we're going to execute on those assumptions but we're going to keep our eyes open to see if we made a wrong call, going to the left and we should be going to the right. having the ability to do that. the annals of history are full of people who had to make those decisions repeatedly. >> how do you figure out the amount you're asking for? they're talking about how they may need to go out for funding again in a year. it's very time consuming. >> so i think the issue is that a lot of entrepreneurs, first thing they do is look at how

much quota as to how much money they need to get to their next milestone. whatever you think is the amount you need ask for 25% to 50% more because you want that contingency plan, if things don't go well, if the testing doesn't go well, to get things back on track. and i think in today's day and age, you're seeing companies raise an issue rev and decide they need an extension that have rev to prove out some of their hypotheses. >> spend time raising fund-raising when you actually want to be running your company. >> i would add to that, however, smart entrepreneurs are always raising money. they're either doing it passively or actively. so there's this thinking that when should i start? when should i be done? when should i get back out there? the truth of the matter is that at some be level you should always be engaged in that. >> thank you so much. it's nice to get to dive in a

little deeper to get into funding. some entrepreneurs aren't worried about getting funding for their companies. deciding to use nothing but their own savings to launch their own businesses, self funded with minimal investment, these small businesses are known as ultra lights. many of them start online with a clear focus on social media in an effort to become profitable as quickly as possible. think you need millions of dollars to launch a new company? well, you don't. meet these entrepreneurs who have done it on a shoe string. >> started with pretty much -- >> we each put in $1,000. it was $2,000 start-up. >> i put in $7,000 of my own money initially into the company. >> these companies are called ultra lights, business founded with practically no capital. >> the idea is that you're not going out and seeking venture

capital. it's money straight out of your own pocket sbout of the organic nature of the business and what the business is generating. >> the founder of ultra light start-ups new york says this business model is right for the times. >> investors are only giving money to successful entrepreneurs or people that already have traction. and so you need to get some traction first, starting with revenue first and then going on to scale afterwards. >> hamilton caldwell started his business, maia yogurt, on his stove in his apartment. he knew he was going at it alone. >> i gave this thing everything i had. >> leveraging the marketing power of facebook and twitter, he spends the majority of his time talking to customers at grocery stores in the new york city area and visiting the pennsylvania facility where, in ultra light fashion he has outsourced his yogurt

production. >> you might start with building your own production facility and building your own testing facility. the fact that he's using a shared facility and production, is he minimizing his cost. >> also able to keep their costs down at ultra light u blanket. the pair took to the web to make blankets out of old t-shirts. >> we hired a seamstress who was able to do the sewing, manufacturing for us. >> the company's only staffers but the pair says that has actually help themd streamline their operations. customers have learned about u blanket through online searches, social media and friends and famil

family. >> his business partners haven't spent $1 on advertising either. >> an online service for artists and creative people to display their work online. basically to show off what they produce. >> the sight started off. thanks to word of mouth, its popularity has grown. that allowed the tr. o to make carbon made a full-time business. >> being very frugal and keeping prices low and hoping that more and more revenue comes in every month. >> carbon made uses revenue to focus on improving the experience of the company's approximately 300,000 current users. >> you want to build a simple product. very few people to start. we basically had to launch the plan from the start. you need that kind of business model where you'll make money from day one. >> carbon made has found and success, fry admits that the ultra light model isn't perfect. the challenges that he and other

entrepreneurs face are similar. >> everything may take a little longer as a self independent company. you don't have as much as access to capital. >> a career advantage. you'll know your business better than anyone else. >> it forces the best practices on you from the beginning and forces you to understand your business from a very intimate level, from the very first stage, right? you're not hiring somebody to do your marketing for you and hiring somebody to do your design for you and your engineering for you. you're doing all had an yourself. >> a good credit report is also important when it comes to asking for funding. here now are five steps you can take to improve your credit and increase your score courtesy of entrepreneur.com. one, pay your bills on time every time. late payments can cause big drops in your credit scores and are the most common piece of negative information found on people's reports. two, keep your credit card

balances low. having a balance that represents 35% or more of your overall available credit limit on each card will actually hurt you. three, correct inaccuracies on your credit reports. fixing swout dated or incorrect information is a quick way to give yourself a boost. four, don't close unused accounts. the length of time you have had credit is one of the factors calculated when considering your credit. five, negotiate your creditors. instead of skipping payments or defaulting on a loan, contact your lenders as soon as a problem arises and see if they can work with you to find a resolution that's within your financial needs. there's more great advice about funding coming up on "your business." brad and christian answer your questions about the right time for a start-up to approach investors and whether crowd funding can be too impersonal. it's back to school time as i return to stanford business

school to find out what you need to know about successful partnerships. is like hammering. riding against the wind. uphill. every day. we make money on saddles and tubes. but not on bikes. my margins are thinner than these tires. anything that gives me some breathing room makes a difference. membership helps make the most of your cashflow. i'm nelson gutierrez of strictly bicycles and my money works as hard as i do. this is what membership is. this is what membership does.

it's time now to answer some of your business questions. brad and christian are with us once again. all of our questions fit our theme about funding. about the right time for start-ups to seek out investors. >> is it better to wait to go after investors until you actually show more value, or is it better to go after the money right away so you don't have to worry about raising money? >> it's a great question. what do you think? >> it is. it depends, right? traction is always great. and in a vacuum, more traction is better. however, you have to take into account the fact that you are burning cash while you are pursuing that traction. what you don't want to find yourself in is the untenable situation where you have no money. money equals options. when you're out of that cash, you're put in a pretty tough spot when it comes to negotiating or pursuing investing. >> it's a trade-off. you have traction, show your company is working but they know

you're desperate so it balances out. >> right. >> you need to make sure that the traction and the metrics that you're showing are actually things that the investors care about. if you think you're in a vacuum, building value around your own building vacuum around metrics and your investors don't care about that date da, then you haven't made any head way. you need to talk to your investors to figure out what it is they're looking for to illustrate your success. this is about soliciting funds online versus meeting someone in person. >> with many websites now, like crowd funding sites, do you think it takes away the personal interaction with investors and prevents you from working one-on-one with investors? >> the question is do you need to connect with them one-on-one or do you just need their money?

>> we have talked about this a lot. the right investor adds a lot of value. it's not just about the money. it's about the advice. it's about the relationship and the experience of those investors. you don't necessarily get that if you're just taking blind money. i would say you really need to look at where you are in your company and see, do i just need money or do i need advice? i would say most of the time you need money and advice? >> what do you think? >> i would agree. i think most of the time you need both. you just need to realize not every investor is a strategic investor. there is a role for people that just bring money to the table. with that being said, with the advances that we've seen in communication, that have been brought forward with crowd funding platforms like angels's, funders club, et cetera, funding is stream lined. so even if they are on the other side of the planet, it's easy to stay connected to keep them abreast. at the end of the day, have you to remember it's the founder's job to do a good job of

communicating with investors and asking them what they need. >> let's move to the last question. it's about capital for international endeavors. >> what's the best way to make u.s.-based investors about global-focused projects? >> ideally to talk to someone who has an interest or experience in the location you're moving into in. >> do your homework. who has an appetite for those type of deals? if you're dealing with an organization with hyperfocus not global, you're barking up the wrong tree. if you find global endeavors, the end is the story. have you to connect the dots for them. some have a bad habit of showing up and expect you to get it up.

need to contextualize your story for them. tailor your story for how your project or your business or your endefavor is going to alleviate that issue. >> i think it's harder to go to people like you or find people like you interested in investing in international adventures? >> we don't normally invest in international. the reason we don't is because we don't have the experience or the local relationships we think are going to add value. however, i think the point was made you really need to find the right investor that has experience. we see a lot of investors that have experience in certain regions so they take technologies from one region and specialize in another global region. i think those are probably the right investors. >> maybe you'll find another company that is not competitive to you but working in the same area. find out who their investors are. >> absolutely. >> thank you guys so much for all of your advice. very helpful. if any of you out there have a

question for our experts about funding or anything else g to our website. the address is openforum.com/yourbusiness. once you get there, hit the ask the show link to submit a question to our panel. openforum.com/yourbusiness. or e-mail us at yourbusiness@msnbc.com. looking to hone your business pitch? our app of the week may be just what you need. small business perfect pitch app gives you tools to help you improve your two-minute elevator pitch. track and follow up on opportunities using the built-in calendar and also offers tips, video demonstrations and exercises that can be viewed offline. it provides web links to even more helpful online resource. 50/50, even steven, that's how a lot of people start partnerships when launching a company today. starting 50/50 can cause

problems down the road. i went back to stanford for my class reunion and i sat down with some professors to get their take on the right way to do business. peter wendell, founder of cr ventures, gave me some advice on how to divide up ownership from the beginning. >> that's always the easy way, oh, let's just do it 50/50 or three founders, one-third each. but, you know, over time some businesses, the contributions of the two parties really were 50/50 but in a lot of businesses one person is interested for a year or so and then moves aside or it's obvious one person is the person who will provide the leadership and overall direction. >> how do you determine how to divide up that equity in the company if it seems, at least in the beginning or in the moment, that it's half and half? >> well, one thing that founders often don't realize is you don't have to divvy up all the equity

up front. so, if you and i are going to divvy up a business together, we'll say, we'll give you each half and then divvy it up in a year. >> this is interesting. you and your partnership get a certain part of the company, you have some set aside, and then when should you revisit it, a month, a year, two years? >> generally the longer they're in the company's life, the easier it is. because if you wait until it's valuable or very big, then you're arguing, you didn't do much, i did more, those are harder discussions. entrepreneurs and business owners are well served to visit this topic from time to time. don't be totally preoccupied with it. just have an honest discussion. it's good. >> what advice do you have for someone who has six years in,

ten years in, it was 50/50 and they're upset about the weight they're carrying themselves? >> well, first of all, talk about it. generally most partnerships, marital, corporate or otherwise, don't do well when people are suffering hostilities quietly. this should not be a taboo subject. it should be something okay to talk about between business owners. and if -- another technique is to vest the ownership or gradually grant it over time. so, in the beginning you initially allocate the shares and you say that, we're going to allocate 100 shares to each of us. as long as we're here for the next two or three years, then we'll own those shares at the end of that time. you know, you have an allocation, then one person decides to leave or something and half the equity just walked out the door. but one person is left to do all the work. so, there are ways to reallocate

equity as a company matures. >> i'm surprised how many people are working together and have no contingency plan for what happens if you want to leave? what happens if, god forbid, something happens to me and my husband owns all the equity in the company. they don't have a buy-sell agreement. >> i wouldn't advise people do that the very first day they start. let's make sure the business is viable, has revenue, and we'll be here for a couple of years. but once we know we have something of value, let's think about what could go wrong in terms of departure and plan for that. >> all of these things, hard discussions to have, but incredibly important. >> absolutely. >> thank you so much. >> to learn more about today's show click on our website. it's openforum.com/yourbusiness. you'll find all of today's segments plus web-exclusive content with more information to help your business grow. you can also follow us on twitter @msnbcyourbiz.

do not forget to be a fan shoeft on facebook. next week, ocean city, maryland, a quintessential boardwalk amusement park. changing anything like that in a place like that is hard. >> it used to be ten cent skeet ball. the public almost died when i had to switch it to a quarter. >> how this company has survived through five generations and plans to be around for the sixth. till then, i'm j.j. ramberg. remember, we make your business our business. ♪ i'm a hard, hard worker every day. ♪ ♪ i'm a hard, hard worker and i'm working every day. ♪ ♪ i'm a hard, hard worker and i'm saving all my pay. ♪ small businesses get up earlier and stay later. and to help all that hard work pay off, membership brings out millions of us

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