Usually, investors are pretty darn good at sniffing out good, clean ways of making money. If the deal (1) makes sense, (2) is explained well, and (3) is presented to the right people, chances are excellent you'll raise your money. But as Michael Belanger can tell you, there are exceptions.
Last year Belanger, a principal in a Watertown, Mass., diaper-laundry business, tried to raise money for expansion through a limited partnership. Under his plan, investors would put up a minimum of $3,000, in exchange for which they'd own about 3,000 diapers (the biggest expense in this business) and earn a projected 20% per year. Belanger and his partners spent four months speaking with nearly 300 prospects. But when they fell short of raising $50,000, they decided to sell out to a competitor.
"We tried to promote this as a conventional equipment-leasing deal," says Belanger. "But people were concerned about what would happen if the business went under." Some worried that deter mining whose diapers were whose would be difficult. "Others," he says, "just didn't want to own a bunch of dirty diapers." -- Bruce G. Posner* * *