| Author | Message | ||
| Mike B (Srt_mike)
Junior Member Username: Srt_mike Post Number: 60 Registered: 12-2002 |
Rob, I've done this personally with 3 companies... first was back in the "internet era" (we were a dot.com that got venture capital from morgan stanley)... I've done it since then with some professional angel investors, and again with private investment. I only mention that because it's a world I am intimately familiar with from the funds-seeker perspective, and more recently from the fund-giver perspective. Some comments on your post (intended to be constructive... feel free to value my advice for what you paid for it). <<< High Level Business Plan - Extensive commercial and consumer revenue streams. >>> I know nothing about your product, BUT, I do know that in MOST cases this doesn't work all that well. It's hard to focus on both especially as a new company. Make that damn near impossible as a new company. Many investors are going to feel the same way, IMO. <<< - No overhead costs or inventory. - Low or no barriers to market entry. >>> Low or no barrier to entry is scary for an investor. If this is so good, why isn't anyone else doing it? If others are doing it, where is the crack management team that will make your company better/smarter/faster? If others aren't doing it, won't they start as soon as they see you doing it? If I am going to drop $2MM, I want to be sure I'm not competing with every halfwit that decided to compete. $2MM is a fairly large barrier to entry - if there are no barriers, why do you need $2MM? <<< - Majority of costs are advertising and labor. Advantage is ability to quickly lower or eliminate these costs. >>> Sounds too good to be true... you know what they say about that. <<< - Estimated Revenues $200k 2004, $500k 2005, and $1 mil. 2006. - Estimated Costs $400k 2004, $500k 2005, and $600k 2006. >>> As Doody said, I don't think any investor is going to touch this. They would be looking for 10x in 5 years or better. In this tough economy, they are going to be extra strict about where they invest. And investors ALWAYS want a crack management team. From experience, I know why. <<< $400k would pay for the startup costs, small office space and equipment, 2 employees to start, and advertising for the first year. Budget would be adjusted accordingly based on market reaction and estimates. >>> You quote $200k income in Yr1, and $1MM in Yr3. That is quick growth which requires $$ (usually).... but while your revenues grow 500%, your costs only grow 50%? Given the claims of almost no inventory and disappearing labor costs, again it sounds too good to be true. <<< I'm serious as hell on this, if I laid a business plan out in front of you I know you would agree it looks good. Don't waste my time if you're not interested, there will be plenty of interested parties. >>> Big turn off to investors is "don't waste my time - there are others". Usually there aren't  <<< I give you my guarantee that I know this will work and is not just an average investment with potential ROI of 10%, this baby 5+ years could be big and go public or be bought out. Revenue stream guaranteed first year. Guaranteed by what? As an investor I want to know your ass is on the line. Your guarantee? What is that backed up with? A lien on your house/car? The only investor that will see guaranteed income is the one you buy an annuity for <<< I'm an entrepreneur by heart and 99.9% of the deals I look at for other people or myself don't add up, I really believe I finally found one to put myself out on the limb like this. I would retain some ownership, but would be seeking just enough capital to get this off the ground and sustain for at least 5 years. >>> Most investors are going to want to break out startup, first round, second round, etc. Every money-seeker always quotes a number as "this is what we need until we break even" but it's almost never an accurate number. As an investor, given the claims made, I would say "how much of that is startup? How much is first round? Second round? I'll tell you what - you finance the startup and after you meet your goals, I will commit to the first round". If you refused, I'd wonder how sincere you were that you weren't putting your $$$ in. <<< Worse case scenario is in 5 years we'll have to look for additional investment. I think those that invest now will never be diluted and the profit alone by then will be significant to fund continued growth. >>> How could you get additional investment without dilution? As an investor I'd be starting to worry about the claims made. Again, no offense but this is what I feel from reading this. <<< The potential for being bought out or going public is what will return a multiple of your investment. >>> Well, with $1MM in revenues in year 3 on a $2MM investment, the buyout profit opportunity (even with a majority ownership position) doesn't seem to grok with what an investor is going to be looking for. Another big issue is going to be the management team. Alot of claims are made - usually entrepreneurs making big claims are to be dealt with very skeptically. I would most likely want to know what your personal stake in this is (i.e. how much of your $$ is tied in), and ask you to front the seed money and bide my time until round 2. If I was investing $$$$$'s, I'd want a MUCH bigger ROI, and through something else than "we can go public or get bought", and also I'd want to see a very strong management team. Again Rob, just my opinion from reading this. Feel free to take or discount it as you see fit. Above all, good luck! | ||
| Rob Lay (Rob328gts)
Board Administrator Username: Rob328gts Post Number: 3639 Registered: 12-2000 |
I know if I just got enough money to do this full time for 3 years I could really make it work, problem is I don't have the money to quit my job and last 3 years. That's why I thought giving up some ownership would be a win win. If I had the money, I would do it without the help, because why should I share all the profit I know I'll be making. | ||
| Robert Callahan (Rcallahan)
New member Username: Rcallahan Post Number: 50 Registered: 7-2002 |
That said, you will still make more money (hopefully) owning your oun business than working for somebody else. Bob | ||
| Robert Callahan (Rcallahan)
New member Username: Rcallahan Post Number: 49 Registered: 7-2002 |
Rob, I've been there. Listen to Doody. If you really need to raise capital, do it as a privatly owned company. Even then, be carefull. Bob | ||
| Mr. Doody (Doody)
Member Username: Doody Post Number: 791 Registered: 11-2001 |
rob - at the end of the day investors don't give a rat's ass what your revenues are, your profits are, or your margins are. all they care about, at the end of the day, is that you're building a business that's going to generate them an N% return in time period M years. i've generated plenty of return for my investors without ever showing a profit. i know plenty of guys who've generated huge returns for their investors without ever generating revenues. a business that can generate a $400K profit in year three and requires $400K to $2M to get there isn't compelling for the investors - unless there's some underlying IP of stupendous sale value (patents, etc.). i don't have a clue what you're doing, but i do have a clue how investors think. hard goods. soft goods. technology. biochemistry. services. kids books. healthfood. whatever. either you have a rational business plan that can generate a substantial return, or you don't. and few people do. only a tiny fraction of the businesses started ever raise equity capital. tiny. most fail, and those that don't usually bootstrap off profits or finance on debt. investors have a gazooly places to put their money - you need to present a compelling reason as to why your bucket is going to produce a return commensurate with the risks of any startup. for example, let's assume that over the next three years i'm earning 15% after taxes in my hedge funds. that's a cumulative post-tax return of over 50% in three years. so $100K invested today for, say, 10% of your company means that in three years you'd have to be able to get to a liquidation event that values the company at over $2.5M (or so, gross, pre-tax) just to meet existing expected return rates in a less risky (though still risky) instrument (the hedge funds). so now multiply that by 2 or 3 (at for starters) since this is way riskier than the hedge funds. so in year three pulling $400K in profits will this business be worth something like $7M? if you just want to build a lifestyle business and pull a few hundred gees a year out of it (good for you!), then you do NOT want investors (at least not six figure investors). finance that sort of a biz with debt and F&F money instead. and don't fool yourself about IPOs - a board of directors with investors on it, and a slew of PrefA and PrefB guys crawling up your butt once a quarter isn't a whole lot less fun than the SEC and Bill Lerach and the barely-educated public. you want a colonic? get a pissy jerk investor who owns 15% of your company crawling up your ass weekly and you'll be praying for a colostomy bag. my two pennies. doody | ||
| Mr. Doody (Doody)
Member Username: Doody Post Number: 790 Registered: 11-2001 |
[deleted - double post] | ||
| Rob Lay (Rob328gts)
Board Administrator Username: Rob328gts Post Number: 3632 Registered: 12-2000 |
LOL, the best would be $2 mil. from one investor right away. Anything less and longer would be a little less than best. | ||
| Jason Williams (Pristines4)
Junior Member Username: Pristines4 Post Number: 127 Registered: 12-2002 |
What's the time frame for "potentially willing to invest $100k"? A month? 6 months? A year? | ||
| Rob Lay (Rob328gts)
Board Administrator Username: Rob328gts Post Number: 3621 Registered: 12-2000 |
I know what you're saying. I think that model is definetley true for a venture with hard goods. The beauty of this plan is there is no inventory, no cost of goods sold, and little overhead. To bring in $400k profit the 3rd year in a retail business would probably require that 10x figure in revenues. This has low costs, the profit margin is high, and it's a simple business structure. | ||
| Mr. Doody (Doody)
Member Username: Doody Post Number: 789 Registered: 11-2001 |
rob - as an investor in such businesses, and as an investee as well, my first reaction is that you're shooting low on the revenue/return side. if you need $2M nobody's going to give it to you in today's market at better probably than a $2M pre-money valuation - especially given that you haven't done this before, and i'm guessing you don't have a management team ready to go, or whatnot. the days of funding powerpoint prez's are over, for better and for worse. at a $4M post-money, if i want to see a 10X in five years you have to sell for $40M, or pay some outrageous dividends - neither of which your revenue/profit growth curves will support. happy to shoot the shite though on stuff like this - shoot me an email. doody. | ||
| Rob Lay (Rob328gts)
Board Administrator Username: Rob328gts Post Number: 3620 Registered: 12-2000 |
Nope, just to parties that would have interest in investing. You have to pay to play. | ||
| Tim N (Timn88)
Intermediate Member Username: Timn88 Post Number: 2425 Registered: 6-2001 |
Whats the general nature of this business? I know you dont want to divulge your whole plan here. | ||
| Rob Lay (Rob328gts)
Board Administrator Username: Rob328gts Post Number: 3616 Registered: 12-2000 |
I'm sick of being bored at work, it's not a challenge working for a Fortune 500 company. Your job function is so specific. I live on an engineers salary and every 3 months the company is laying off. I have too much ambition and ability to let it go to waste 45 hours a week. I just found some info on a user who started his own business in 1987. He now has 700+ employees and it's still privately held. I saw the other post about going public, I don't think that's the way to go. Private you have less oversight, overhead, and headaches. I won't divulge my business plan on here, but here's an overview, only contact me if you're serious and are potentially willing to invest $100k+. My education background... - Graduated Babson College B.S. Wellesley, MA 1996 Finance/Investments/IS - Graduated University of Dallas M.B.A. IS 1999 - George Washington University Project Management Training 2000-2002 - Dallas County Auto Tech 2000-2002 Work History... - Edward Jones Brokerage 1991-1992 - Babson House of Sound retail music founder and owner 1992-1995 - Babson Information Technologies Dept. 1995-1996 - Information Systems Consulting 1996-1999 - Senior Software Engineer 1999-Present - Curvacom LLC founder and owner 2001-Present High Level Business Plan - Extensive commercial and consumer revenue streams. - No overhead costs or inventory. - Low or no barriers to market entry. - Majority of costs are advertising and labor. Advantage is ability to quickly lower or eliminate these costs. - Estimated Revenues $200k 2004, $500k 2005, and $1 mil. 2006. - Estimated Costs $400k 2004, $500k 2005, and $600k 2006. - Estimated $400k EBIT starting in 2006. - Investment Capital needed: $2 mil. $400k would pay for the startup costs, small office space and equipment, 2 employees to start, and advertising for the first year. Budget would be adjusted accordingly based on market reaction and estimates. I'm serious as hell on this, if I laid a business plan out in front of you I know you would agree it looks good. Don't waste my time if you're not interested, there will be plenty of interested parties. I give you my guarantee that I know this will work and is not just an average investment with potential ROI of 10%, this baby 5+ years could be big and go public or be bought out. Revenue stream guaranteed first year. I'm an entrepreneur by heart and 99.9% of the deals I look at for other people or myself don't add up, I really believe I finally found one to put myself out on the limb like this. I would retain some ownership, but would be seeking just enough capital to get this off the ground and sustain for at least 5 years. Worse case scenario is in 5 years we'll have to look for additional investment. I think those that invest now will never be diluted and the profit alone by then will be significant to fund continued growth. The potential for being bought out or going public is what will return a multiple of your investment. Please email me [email protected]. If you're truly interested I will give you a call as the next step. Regards, rob |