Tips and tricks from pros who’ve done it themselves
Few restaurants are able to hit the ground running without investors. Even with a great concept, it can be challenging to raise the capital to turn your idea into a reality. Raising money will always be a process, so it’s important to think about how you approach potential investors to get them to truly believe in your project, and open their checkbooks accordingly. For restaurant funding advice, we spoke with Camilla Marcus, the co-founder of TechTable and former Director of Business Development at Union Square Hospitality Group, who is also an investor in three restaurants; and Ian Calhoun, the owner of investor-backed restaurant 80 Thoreau, who also holds an MBA from Harvard Business School, for some macro-level best practices.
Camilla Marcus (far right) with TechTable co-founders via huffingtonpost.com
Cultivate a network
For first time restaurateurs, Marcus recommends focusing on developing a network. Sometimes that involves investors from where you’ve previously worked, family, or friends. It's good to look for "wealthy go-getters," says Calhoun—people who work in high-paying industries like finance and may be interested in investing in other fields, and, better yet, bringing in their similarly-inclined friends. Sometimes an investor can even be a former employer, as Marcus explains: "Former employers might invest in employees who start their own concepts as a way to stay involved with their rising stars."
Sometimes patrons from a place you’ve previously worked may also want to get involved: “People will invest for VIP access,” says Marcus, so it's important to work any freebies you might dispense into your financial models. Calhoun gives similar advice to first time restaurant owners and encourages maintaining that network for further down the line should you decide to open up another concept. In fact, of the 16 investors for 80 Thoreau, 13 are investing in his newest project.
Get people excited about you
Unlike other business ventures such as real estate and tech, there aren’t a ton of firms that invest in restaurants. So before showing potential investors numbers and metrics, both Calhoun and Marcus advise getting the investor sold on you and your concept first. Make sure you’re presenting yourself in the best way possible—get people excited about the restaurant’s menu, its aesthetic, and why it will be special or different from whatever else is out there. Once people start buying into your idea, they will help want to help you expand your network and introduce you to others to help get the project running.
Calhoun notes that it’s also important to keep in mind that if someone seems hesitant or pushes you away, they’re probably not the right fit. But don’t get too discouraged by this: “Passes might have nothing to do with you, it might just not be the right time for some people,” says Calhoun.
Image of Ian Calhoun via hbs.edu. Photo by Anthony Tieuli
Invest in helping hands
It’s worth it to hire a few strategic third parties to help with your pitch. “Good investors will require good paperwork,” explains Marcus, “if you skimp on your lawyer, you can get in trouble later.” Paying for a lawyer while trying to raise money may seem overwhelming, but it will be well-worth the expense when your concept pays off. You may also consider hiring a designer to make your deck look professional, and enlisting someone with a background in finance to run the business model, Marcus advises.
Once you have all of your paperwork together and have investments coming through, sometimes the most stressful part is managing investors that first year, since they haven’t seen any returns yet. In the first year in particular, it can be hard to show investors solid numbers because your restaurant might not even be fully up and running! Keep calm, trust your gut, and manage your investors through the developmental phase. After all, investors most likely invested in you and your concept because they believe in you too.