Wally Amos, founder of Famous Amos and Chip & Cookie, on raising capital and choosing investors
In 1975, Wally Amos launched Famous Amos Cookies, which is now owned by Kellogg. He has since founded three other companies, including his most recent start-up, Chip & Cookie, based in Hawaii. Here, he answers a reader's question.
Q:We've been selling our beer in New York City for eight years. I get requests from customers from all over the country, but I haven't been able to generate enough capital to expand. What can I do?
Celeste Beatty Founder Harlem Brewing Company New York City
A: It sounds as if you probably need to look for outside funding. I've had to raise capital for all of my companies, and I'm going through this process again for my new company, all while the economy is going to hell in a handbasket. No matter how many companies you've started, the process of raising capital is tedious and time consuming, and it requires more meetings than you'd ever want to have.
If you're anything like me, raising money probably isn't what you're good at. I've learned along the way that I definitely can't do it on my own. I've found that the best way to get started is by talking to all the people around you. Use all the relationships and contacts you've accumulated. Many times, I've found investors through friends. You should also try networking with other business owners. I recently met an investor for Chip & Cookie after I gave a speech to a local business group. He came up to me immediately after the speech and said, "I can give you $50,000 today."
Of course, when you raise money, there are always risks. You have to decide if expanding the business is worth losing a slice of your company. If the slice is too big, it can cost you. In 1985, during a tough time at my first company, Famous Amos Cookies, I gave up a majority interest to a group of investors. In 1994, five years after I left Famous Amos, I tried to launch a new company and found that I wasn't even able to use my own name.
You need to be careful about whom you take money from. In retrospect, I think I brought in the wrong investors to Famous Amos, but I'm not sure I could have made any other decision at the time. You can do all the background checks in the world, but ultimately, you have to use your judgment. I've had businesses fail and succeed, and I've had good partners and bad. Most entrepreneurs look at bringing on investors as a sacrifice, but they can also give your company exactly what it needs to thrive.