investor question

gerrycollins

im proposing to start up a business which i know will be a suscess in a few years but not straight away, hard to believe i know but just go with me on this one

the final touches are been put to the business plan at the mo but im in need of investors as i cannot stump up all the cash at once,but i wish to retain control of the company so limit investors to 2 or 3 plus me

one idea i had was making investors directors in a Ltd. company and paying them salaries and buying them out with an increase on their investment based on a contract after a set amount of years

question 1 where can i look for potential investors so i can put my plan to them

question 2 does anyone think the above idea is stupid and should be avoided at all costs
finially
question 3 am i mad

xha1r

It's common with most new businesses to not make profit in the first few years. The key is your experience and how investors feel you can run the company.

Regards getting finance, I would stay away from family if a large some is required. Bank loans are a possibility but perhaps you'd like to consider venture capital. Although I'd imagine a VC would want more ownership then you would give.

If you are export business, EI are keen on hearing from new business and offer grants to such companies. You might be able to get a grant from your local Enterprise Board too.

There's a lot about this on the internet, I'll post links if I can remember them.

All this is my opinion however, so don't take it as fact

Good luck.

http://www.startup.ie/index.asp might be of interest.

gerrycollins

ill be the first to know its not going to make money in the first few years hence the buyout after a few years

banks loans only give 75% of the start up capital it the 25% i need help in raising

venture capital is what im after but who does it? im a bit thick lol

I have 2 groups who are intrested in investing depending on the business plan of course and yet not take active part in the business other than a return at the end,but i dunno if the 3 of us can make the 25% thats the issue really

xha1r

http://www.ivca.ie/ - Irish Venture Capital Assoc.

They have a directory on there where you can search for VC's which deal with different sectors/industries.

http://www.ivca.ie/find_venture.php

It's difficult to comment without knowing how much you're looking for, but believe me, I know how people don't like disclosing such information. I'm at the beginning of a start-up myself and don't like saying much about it, even to friends and family. Paranoia, eh?

gerrycollins

xha1r wrote:

http://www.ivca.ie/ - Irish Venture Capital Assoc.

They have a directory on there where you can search for VC's which deal with different sectors/industries.

http://www.ivca.ie/find_venture.php

It's difficult to comment without knowing how much you're looking for, but believe me, I know how people don't like disclosing such information. I'm at the beginning of a start-up myself and don't like saying much about it, even to friends and family. Paranoia, eh?

i know in case someone will "rob" it

i checked out the site last night and there are a few but they have no history is investment in the area of my choice but i suppose i can only ask its in real early stages at the moment

kluivert

Personally I would ask family members for the money and give them a share in the company.

Make sure that they understand that like all investments, the value may rise as well as fall.

jayok

Well all business need cash to run and it's a common problem. As Kluivert said maybe family members might be able to lend here, but this can be a sensative area. How much are you roughly are you looking for? This would give us some idea of how best to raise the money.

ambro25

For all things business, and if you consider calling upon family members to help stump up some of the start up equity, what you absolutely must ensure is you treat family like any other investors, and establish a clear and unambiguous paper trail as to who lent what, when, and expect what, when and with what appreciation. Preferably in written contractual form. It's not because they *might* be a softer sale for your project, that you do not owe them as important a fiduciary duty as you would a bank or VCs.

jayok

In case you're like me:

fi·du·ci·ar·y ( P ) Pronunciation Key (f-dsh-r, -sh-r, -dy-, f-)
adj.

Of or relating to a holding of something in trust for another: a fiduciary heir; a fiduciary contract.
Of or being a trustee or trusteeship.
Held in trust.
Of or consisting of fiat money.
Of, relating to, or being a system of marking in the field of view of an optical instrument that is used as a reference point or measuring scale

gerrycollins

jayok wrote:

Well all business need cash to run and it's a common problem. As Kluivert said maybe family members might be able to lend here, but this can be a sensative area. How much are you roughly are you looking for? This would give us some idea of how best to raise the money.

trust me family are out of the question and if any of them wanted in it would only be 2 of them as they are business people themselves so they would understand how it works as in "your not family anymore youre an investor"

the whole deal is in its infancy but the figure would be somewhere between €1.25m-€2m with me providing the remaining 75%

i have looked as i said at some VC and they not specifically looking at my sector but there are a few who are willing to invest the amount i need in any sector but have not been specific to any sector so i can only guess that my business plan will need to be very good and sound

I have emailed a few to see if they are intrested in talking to me when the business plan is finalised better to get the rejection now rather than later so i can look elsewhere

TheFredJ

speak to your local country enterprise board, and then possibly enterprise ireland. if you're going the vc route, ei will offer the best assistance.

a potential source for finding investors is always your accountant - he is usually someone plugged into the network and knows who has and has not got money to invest.

for the size of investment you're looking for, you can expect to surrender more than a handuful of % of your business - a vc would probably be looking for atleast 30% for that amount of money just for a paper-based business. you might get away with offering less if the business is actually up and running. so you might re-consider your timelines - find a smaller amount of seed capital that would carry you through the first year and then hit the vc's.

as i say though, your local county enterprise board and / or enterprise ireland should be approached at this stage.

lomb

[QUOTE=TheFredJ - a vc would probably be looking for atleast 30% for that amount of money just for a paper-based business. [/QUOTE]

more like 65% id say. no one in their right mind invests unsecured with no control. theyl want directorships, ban kaccounts where they have to sign for any large amounts. also required is full control from a vote point of view.

also no bank will lend u 3 million unless its secured to a property even if thats your own. they wont lend more than 75% for a commerical property secured they are not crazy enough to lend it for investment in research. if u find one then it wont be a bank thats lasted any length of time. personally i think that you are better growing organically and using invoice discounting to provide finance. at least you will know if its going to work fairly soon from customer feedback.if what u require the money for is risky like technology development then maybe looking to the likes of india to further it cheaply is sound. remember the vast amount of new starts dont survive and any vc knows this. to mitigate their risk taking more than 50% and becoming directors is the only way. if its property u are investing in getting finance is easier, but even that isnt that 'easy' in the scheme of things if its commerical property. trust me when i say that speaking from experiance. good luck with it!

a_ominous

For many startups, the sources of funding are typically

• self
• friends + family
• bank
• Enterprise boards - Seed Capital allowance from Revenue
• Enterprise Ireland
• Venture Capital

VCs will require a share in the company and a seat on the board and will have a minimum investment of a couple of million for first round and probably > 5m for 2nd round.

If you raise funds from friends and family, you do not have to relinquish any control: you get a loan from them, which will be repayable in 2-3 years or whatever. This should help you get thru first 6 months.
After that you can go county enterprise boards who do not require any control of a company. They can approve you for the Revenue Seed Capital scheme and BES. There are also small grants for basic feasability studies.

With external funding, it may not be all necessary in one tranche unless you have some big outlays near the start.

Just a small sidenote to OP: if ppl invest a sum in your company and you pay them a salary, they still own a share in the company. Salary <> shares. It's all money but has different purposes and legal effect.

There are also networks for different business types, eg First Tuesday for ICT. County enterprise boards may be able to help. A first draft business plan will help. It will change as you learn more about the process, but the business idea should be more or less the same...