Although it would be nice to think that venture capital firms were salivating to fund direct selling companies, this is not the case. First, the amount needed, which often is merely a few hundred thousand dollars is “too small potatoes” for most venture capital funds. Even the best MLM companies are often started by inexperienced business persons. Venture capital firms are not comfortable in this context.

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Surprisingly, many of the giant direct selling companies in the industry today had humble beginnings, often with one individual’s dream. That individual usually had little or no money and became a MLM mogul after years of dedication; stirring laundry detergent in their bathtub or selling bibles door-to-door. Some were lucky enough to grow their companies without the financial backing of investors, but others were not. (Like the rest of us!)

Many MLM entrepreneurs are lucky enough to have a dream to start a MLM company but lack the capital needed to fund the project. Most people turn to family and friends, to co-workers, then to angel investors, and finally to private placement venture capitalists to find the money they need to grow their business. Investors may listen to the presentations, but the money is never a guarantee.

Searching for MLM Startup Capital – Funding the Direct Selling Company

What is the first step in the process to secure capital to fund the MLM startup dream? It is the business plan, of course! Before any sophisticated investor or angel financier will consider funding your marketing program, they will look for an organized presentation of your ideas, projections and abilities. A good business plan will be the backbone for any private investment of capital and will also help to bridge financial gaps as your company grows.

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This blog post is the companion post to the video Raise Capital in Order to Recruit Key Distributors. MLM Attorney Jeff Babener discusses the need to raise capital in order to recruit key distributors below.

Hi, I’m Jeff Babener of MLMlegal.com and I’d like to talk to you about capitalization, can you recruit? Do you have a great recruitment background, the ability to recruit? Or a lineup of strong distributors? If so, your need for capital will be substantially diminished.

In the end your ability to recruit a talented and motivated sales network will be the number one key to your success. In fact, your need for capital is in direct inverse proportion to your ability to recruit. If you can recruit then you may have a cash cow on your hands. If recruitment is slow then your business plan needs to allow for buffer capital to hold you through one, two, or three years of break even or loss scenarios. That capital should be lined up ahead of time either through personal and close relationship resources or through angel investors.

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