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  1. #1
    Join Date
    Mar 2002
    Location
    Philadelphia, PA
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    Investor Relations At Seed Stage.

    Well I think this would be the best place to put this thread Since this area is dedicated to people who operate business.

    However, My question is, I am looking for angel investors for a company that I am looking to start. This is not a web hosting company, but some of the products I will sell, will deal with web hosting.

    I have been speaking to a retired CEO from the state of Maryland. He is very interested in my business plan, and wants me to meet in person. The big problem is, he is wanting to invest into a large company, and invest the sum of roughly $150,000. I have explained to him that this will be a small business, and I am looking for a $50,000 investment. Now he is not interested in investing anymore, because as he said "There is not much profit to be made in small business".

    Now I am back on the market looking for angel investors. However they are VERY hard to come by, especially when you are only 24 years old, and have never ran a business before(I have managed a business before), my crudentials are lacking. The only thing I can put on paper is a certification that I took a Business Course.

    It took me roughly 6 months to connect with just one investor, however as stated above we were not on the same page. Although, this investor was referred to me by his lawyer which happens to be my Aunt. Therefore, I have found exactly zero investors on the internet and going to business fairs, handing out my business card, with a spreadsheet of information, containing partial information from my Business Plan.

    My Business Plan, is well written, and contains everything an investor would want to know about a Business Idea.

    My Question is, how would I go about finding an investor within the next six months or so. I am in no hurry, however I would like to get my operation off paper, and into the works.

    I have inquired about a business loan, however all banks require a pretty high monthly payment after 60 days of the loan payment to my business. While the company would be stable after several months, noticeable profitability would not come until the first year.

    Thank you in advance!

    Please post a reply, or email me at [email protected]

    - Anthony
    Linux junkie | steward.io

  2. #2
    I would look into your local SBA (Small Business Association). I personally have not gone through them, but I do hear they have programs set up, and they can help pitch your plan to investors.

    As you know, right now is probably the worst time to find someone to invest in anything, but much more, an Internet company (I assume thats your business). I certainly am not saying give up, but you will have much better luck looking in to people in your town, people you know, neighbors, people you go to church with, someone that doesn't play with their money on a large scale, because you simply end up competing your business plan against many others.

    Why didn't you take the $150,000?

  3. #3
    Join Date
    Sep 2002
    Location
    Phoenix area
    Posts
    1,121
    If he says there's not much profit to be made in small business, then either he didn't read your business plan, or you don't have it geared toward small business.

    What kind of SWOT analysis did you do to point out how you will compensate for your temporary lack of experience? What kind of references did you use to prove your ROI? You need something to set you apart from the herd.

    The SBA is a good place to start, but use them to send you to places to help each step. Their loans will only help if you can't get conventional financing.

    I'm in the middle of coming out with a reference site for small businesses to help with exactly this kind of situation, so I have some info, but the site won't be live until January.

    Here's a few links I have that should be pertinent:

    http://Garage.com
    http://www.businessfinance.com/
    http://www.sba.gov/financing/
    http://www.sba.gov/INV/venture.html
    http://www.sba.gov/financing/frmicro.html
    http://vcapital.com
    http://www.v-capital.com.au/
    http://www.vfinance.com/

    http://www.vfinance.com/invisiframe....p%26Tracker%3D

    http://www.njsbdc.com/scitech/
    http://www.vanj.com/
    https://secure.hostdepot.com/09/239/opportunities/

    That should keep you busy for a while. Contact me if you'd like more.

    Please check these out before signing anything with them. I have not verified them all yet.

    Also, make sure that you have anyone sign a non-disclosure agreement before you let them see your plan.
    Learn survival/prepper information from a combat veteran at Graywolf Survival

  4. #4
    Join Date
    May 2002
    Location
    MN
    Posts
    223
    The problem here may not be your ROI, Now that the bubble burst investors are no longer willing to just drop there money into a bucket and wait for huge returns.. Things have gone back to "pre-bubble" state.

    What this means, the investor you talked to, or for that matter most of the investors out there will not be happy with just giving you money. They will keep track of your business, Possible provide input and otherwise "direct" you in the better interests of there investment.

    Now since a person only has so much time in the day, A investor would prefer to invest $150,000 and get a return of $25,000, then to spend the time to invest $50,000 in your company and get $20,000.

    While your return does show better ROI then the larger amount, It is not the ROI that matters to the investor but the Bottom line..

    Or in general sense..

    He invests $50,000 in your company, spends 5 hours a week "helping" your company do well.. he gets $70,000 in return - $20,000 profit

    He invests $150,000 in another company, spends 5 hours a week blah blah blah.. Gets $175,000 in return - $25,000 profit

    Your return not only has to provide a good ROI but be worth his time spent, He figures investing nothing less then $150,000 is worth his time.
    Personnal Blog
    PHPJack Inc. Technology Consulting Services
    I can help you with your technology needs from beginning to end.

  5. #5
    Join Date
    Sep 2002
    Location
    Phoenix area
    Posts
    1,121
    yes, that was the part that was bugging me that i forgot (its early morning here and i haven't gone to bed yet).

    WIIFM? Is the key here. Investors have different reasons for investing. Some do it for the money, some do it for the thrill, some do it for the control, some do it for prestige, some do it philanthropically, and a lot of other reasons. You gotta find out what he's looking for and find out what's in it for him.

    The $150,000 vs $50,000 tipped me to that and i friggin forgot (sorry). He may want to have more control and figures $50k won't give him enough leverage, or maybe it's as simple as a 5% return on $150,000 is 3X that of $50,000. Having the extra capital will also pad you in case you need it. You should plan as realistically as possible, but remember that your real costs are probably many times what you thought they'd be.

    Getting an investor is exactly the same as getting a job. Your business plan is your resume. You need to find out what makes him tick and then hit his hot buttons.

    Also, not all investors are right for all plans. You should find someone who deals with your particular type. Investors have invaluable connections that are worth sometimes more than their money.

    BTW, if you're only going after $50k, how are you going to work in your salary? Hard to find an investor for someone with another full-time job.
    Learn survival/prepper information from a combat veteran at Graywolf Survival

  6. #6
    Thank you for the excellent advice everyone, I am surprised to see such knowledge on this topic. To answer some questions...

    I have this business plan completely layed out, I did not accept the offer for $150,000, because it was not in my plan, and is more than I require.

    I went over my ROI, with several market analyst, as well as my lawyer. It is very to the point, and provide a great deal of market information, as well as return expectancies.

    I am going to look into this small business association, and see what I can turn up!

    Thanks for the advice everyone!

  7. #7
    Join Date
    Sep 2002
    Location
    Phoenix area
    Posts
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    Keep us up to date on what goes on. Curious how VC is working right now and what works/doesn't work. Good luck in finding someone.
    Learn survival/prepper information from a combat veteran at Graywolf Survival

  8. #8
    Join Date
    Mar 2002
    Location
    Philadelphia, PA
    Posts
    2,508
    Thanks Skelley, your help is greatly appreciated. I am going to look into a SBA loan, as I hear the interest rates are good, and they will even put you through a course!

    Once again, thanks everyone for the help.

    I will post a follow up as things progress.
    Linux junkie | steward.io

  9. #9
    SBA is Small Business Administration, not Association, just to let you know.

    I'm not trying to put a damper on your business start-up, but it will be extremely difficult for you to persuade an investor into funding you. Now that the dot-com bubble has burst, investors are much more protective of their capital and accept only the best as their partners. Basically, investors are going to focus on the credentials and background of the management team. They want an innovative group of individuals that have had an enormous amount of experience in the field that they are about to launch a business in and they want the individuals to have extensive management skills.

    Again, I'm not trying to deter you from continuing on with your business concept, but you need to look at the cold, hard facts and face reality. I'm just trying to save you valuable time that could be better spent in trying to make your business work without the need of investors. I do suggest, however, that you may want to try rounding up your seed capital from fellow family members, especially ones that know you personally and know what you are capable of.

    Also, don't think that you've wasted your time by creating some 50 or so page business plan. Use that plan as your guide to making your business a success.

    These are just my opinions and suggestions and you do not have to accept them if you do not want to.

  10. #10
    Join Date
    Nov 2002
    Location
    Delray Beach, FL
    Posts
    254
    Vigor,

    I wanted to expand my web development firm and because of my age only 19 here, it was going to be hard. Then back in September a family member cut out an article in the local paper about a course being put on by the Entrepreneurial Training Institute (ETI) and The New Jersey Development Authority (NJDA)
    about how to write a business plan. The kicker was after you finished the 8 week course you got to a lender's roundtable where you present your business and around 30 or so lenders compete for your loan. Cool huh!

    We'll this Wednesday is week eight and the last class I am finishing up the business plan now and should have it finished by the end of the week.

    The class is really great and so are the people not to mention the fact that I received more then one web development job from other people in the class.

    I would say it was the best $250 business investment I have ever made, well besides my first computer that got me started.

    Here is the link to the site that puts on the class:
    http://www.njeda.com/

    If you are not from NJ I would say contact them and I'm sure they could put you in touch with somebody who could help you out.

    Good luck and feel free to email me if you want to talk....
    Gregory A, Van Horn
    President/Senior Web Developer
    Transcend Media Interactive Development & Marketing Group

  11. #11
    Join Date
    Mar 2002
    Location
    Philadelphia, PA
    Posts
    2,508
    Thanks for the assistance!

    And thank you for the great link vhedesigns, fortunately I am a New Jersey resident, which is a bonus

    I will check that out that link, sounds like a good idea to get involved with.

    Thanks!
    Linux junkie | steward.io

  12. #12
    Join Date
    Nov 2002
    Location
    Delray Beach, FL
    Posts
    254
    Vigor,

    Best of luck!

    Glad you're from NJ they did a study and the NJEDA is supposed to be the best state group when compare to other states.

    Feel free to email if you want to through some business ideas around or discuss some sort of partnership... Your never now.

    Good Luck,

    Gregory A. Van Horn, President
    _________________________________
    Transcend Media Group
    [email protected]
    Gregory A, Van Horn
    President/Senior Web Developer
    Transcend Media Interactive Development & Marketing Group

  13. #13
    Join Date
    Oct 2002
    Location
    Maryland
    Posts
    127
    Here is what worked for me:

    1) Found a business partner who possessed the skills I lacked
    2) Each of us put up a small % of the start-up $ needed
    3) Formed a manager operated LLC where our combined share was 51%
    4) Found various investors who were able to put up a considerate amount of money but were not funding the whole start-up
    5) Wrote them into the LLC operating agreement with their % based on the amount invested.

    In the end, with my partner and I as the operating managers, we retained control of the company on the day-to-day and the investors have voting rights for major decisions, as outlined in the operating agreement.

    Feel free to e-mail me at [email protected] if you would like a copy of the agreement ... with sensitive information removed for obvious reasons.

    Of course, you would still need to have your attorney look over the operating agreement as it works for our needs, but may not work for yours. In total, I think it is 12 or so pages, perhaps longer (don't have it in front of me)

    By investing a small amount of cash, and making the difference up in sweat equity, it shows that you believe in your plan. By finding your first outside investor, putting in maybe just 5K, it shows that others believe in you also. Perhaps your aunt could be this first crucial investor.

    And I cannot stress enough: CONFIDENTIALITY/NON-DISCLOSURE AGREEMENTS all around!

    Best of luck and don't lose focus! If you are persistent, you will get the money that you need!

    And make sure to turn one of your investors into a mentor!
    Jesse Barron
    [email protected]
    Epitomized Hosting: Exceeding Your Expectations
    www.epitomized.com

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