What's Ben Worth?

It seems crazy that raising larger amounts of money is easier than smaller amounts, however this is the paradox of raising money. The reason for this is simple -- above a certain investment level (normally around $1m) the money switches from seed investment, which is normally a wealthy individual who wants to take a punt to venture fund money. When it switches to venture money, then the people running the fund get a percentage of the fund to manage it, so as a fund what takes less work? Doing 10 deals at $10m or a 100 deals at $1m, you invest $100m either way, but by investing more you work 10 times less and expend much less resource and ultimately make more money.

That’s the case with raising money for our solar company. Currently we are raising a billion-dollar fund for our solar company in the USA, and we have raised hundreds of millions already for our UK solar company. So why bother raising $500K when I have already raised hundreds of millions for my other companies, why don’t I just invest myself?

Well firstly and most importantly, it comes down to a metric I hate: “How much are you worth?” It is the first thing that the media asks, and then if you don’t answer the question, they try and work it out based upon the value of your companies. The last time the media tried to pin me to a figure they worked it out at $10m, but what people don’t understand is that is not how much cash you have in the bank; net worth is theoretically what you could sell your companies or assets for, in fact hardly any millionaire would have more than $1m in cash in the bank as it is a very inefficient way to hold wealth. Why then don’t I just sell some of my companies so I can invest the $500k myself? Well lets look at somebody like Mark Zuckerberg. He may be worth close to $10b but the reality is the vast majority of that is in stock. If Mark tried to sell all his stock at the same time, the market would panic, the share price would drop, and he may get 1/10th of what he would have gotten if he had waited and sold the company for the full value its worth. The same is true if I wanted to sell my companies quickly. I can’t tell you whether I am worth less than $10m or more than $100m, all I can tell you is that I have 45 companies, some very successful and some failures, but I know if I had to liquidate them to raise money I would probably be loosing 90% of the value I have spent ten years creating.

But why ask an investor to risk their money when you could invest your own? Well ultimately an investor is taking an educated bet on an investment. I have been a seed investor in many companies myself, and I know that maybe 1 in 10 will be successful, but you hope that 1 will pay for the rest, and normally it does, otherwise people would not do it!

Ignite needs to raise money, and to do so we have to push everything to the limit including our partners. It may seem that it is unfair to get our partners to take that risk with us, but ultimately business is business and they are taking the risk with us to get a profit in the end. Everything in business is about taking the right risks.