Don Hunter’s Plan to Provide Equity Capital to American Small Business
This article was originally posted on The Wall Street Chronicle and written by Laura Ratcliff.
Donald J. Hunter has made an extremely successful career by being an analytical virtuoso. Over the course of the last 25 years, he’s created an enviable business history first as a broker, and then, moving his way up through the ranks, as managing director, COO and CEO at some of Wall Street’s most successful brokerages. Despite all of that, he will be the first to tell you that it started out as nothing more than luck. In fact, a career as a financial analyst and broker was not even in the cards until Lady Luck stepped up and changed his story.
Hunter, 47, was a semi-undecided psychology major at Colgate University in New York when he literally won a top spot in a lottery. Not a Mega-Jackpot dollar lottery, but the coveted lottery for prestigious internships held at Colgate each year. Since Hunter received number two in the lottery, he had the second highest choice of internships available to all students who were looking for a great opportunity. He chose an internship at the brokerage firm Drexel Burnham Lambert during the School’s 1 month J-term (January-term) and discovered that he not only had an affinity for the financial world, but he loved it. He went back to Drexel for two more internships and following graduation went to work full time for the firm.
Over the course of the next two decades, Hunter worked at several other firms, making his way up to the CEO position at Westrock Group, Inc., where he helped broker and manage the historic sale of the firm to LBC Western Holdings. The sale was historic because the Lower Brule Sioux Tribe owns LBC Western Holdings; Westrock was the first brokerage firm to be acquired and owned by a Native American tribe. At the time of the sale, Westrock had over $1.4 billion of assets under management.
Since the sale of Westrock, Hunter has been consulting for a variety of financial interests, but his latest and possibly most exciting venture is something much less traditional than his previous professional work. Hunter is founder and CEO of You-Funding.com, an equity crowdfunding platform. While some readers may wonder what the big deal is (after all crowdfunding has been around for years), equity crowdfunding is entirely another ball of wax. Instead of nebulous reward programs or “feel-good” online karma, equity crowdfunding investors can hope to see big monetary returns.
Before the JOBS Act (Jumpstart Our Business Startups Act) was signed into law in 2012, small businesses that needed under a million dollars in funding to get going were often out of luck. Banks often don’t want to loan large amounts of money to untested startups because the rate of failure can be very high. Trying to get a half a million dollars (or more) in startup money from “friends and family” is often impossible unless you happen to live in Silicon Valley and have invented the next big thing. Enter equity crowdfunding. According to Kendall Almerico, a contributing writer at Entrepreneur.com, “anyone who wants to start or grow a business will be allowed to use an online equity crowdfunding portal to raise up to $1,000,000 by selling stock in their company” (companies who need funds for growth after an initial start up are allowed to raise up to $10 million in secondary offerings).
Sounds simple, right? Not exactly. The problem is that equity crowdfunding, even though it’s relatively new, is eventually going to involve billions and billions of investor dollars (some people, according to Almerico, predict it to become a trillion dollar industry) and the safeguards for this activity have been mandated to be established first. For that reason, it’s not as if any company that wants to raise money can simply set up a website and say, “Hey, send us some money so we can get started!” While the JOBS Act had broad bipartisan support when it was passed and signed into law, it requires a high level of consumer protection in the form of Securities and Exchange regulations and FINRA (Financial Industry Regulatory Authority) oversight.
Hunter says he and his team carefully screen and evaluate the businesses accepted into the You-Funding.com family of startup or growth companies. Both he and a securities attorney vet companies who are interested in getting funds through equity crowdfunding. “Ultimately,” says Hunter, “it comes down to three things: they have to know their business, they have to have credibility in their industry, and they have to have a solid idea that they can perform on.” Hunter and his team are constantly on the lookout for companies that are candidates for equity crowdfunding. While there is no hard timeline for signing up new companies for investment, You-Funding is working to add new investments on a monthly basis. Hunter notes that he finds businesses that are good candidates in a variety of ways. Sometimes, he will get a call from a broker he knows who cannot fund a particular company because it is too small for their investment portfolio. Other companies have made inquiries through the You-Funding website or online advertisements, and often he finds companies through old-fashioned networking.