Crowd Funding a Business

magic_murph

Just an idea and wonders if it could be practical.

Example - beside my office there is a great opportunity to offer good quality healthy salads (Sick of those places that insist on serving that 'plastic mass produced chicken'

I dont have any background in food to running a food business so the below is all hypothetical:

So to start a new food business its going to cost 250,000 random number.
At the moment I dont have 250k laying about - its been a touch month.
(Rent, equipment, fitting of premises, advertisement, staffing etc)

The business could be broken down into 250,000 units, each worth 1euro (min investment say 5k)
People can invest as much as they like.

With the money we hire a manager all the staff. Work with the manager to get suppliers all sorted out etc.
As 'share holders' we are essentially hands off and just take a slice of the profits.

After expenses profits are divided between the shareholders based on initial investment.

Could be a yearly return with the ability to sell your 'share' at the same value to bought in or at a profit depending on how well things go.

All notions and just a brain dump wondering if something like the above could every work. (Obviously everything would be legal etc)

Graham

There's fairly strict laws around offering shares for sale to the general public. I suspect you'd eat more than the €250,000 in legal fees/regulatory compliance.

The UK has something along the lines of your description that's designed to encourage start-ups but I don't think there's an Irish equivalent yet. Most Irish crowd funding models consist of customers 'funding' the company in return for 'rewards' that escalate in value in line with someones contribution.

E.g. if you fund €500 you will get a sandwich. if you fund €1000 you will get a double-decker sandwich.

You'd need to sell a lot of reward sandwiches to raise €250k.

jimmii

You could do it via Linked Finance but I think you need to have been running for a couple of years to get funding via them.

250k maybe a random number but it is a very unrealistic random number! Raising €50k for something like this seems pretty optimistic unless you have a decent track record.

magic_murph

Cheers guys.
It was a pure hypothetical question and if implemented it would come with its own headaches - who has the final say, would that be down to %owned / invested.
One investor wants to expand (Invested 100k) whereas the majority dont want to expand (all invested 5k each)

I am sure all those things could be setout at the start.
Investment is for this property only and manager has final say
If a new store is opened then original investors get first refusal etc.

I seen something similar on Daft a while back.
Big house in Rathmines values at 6 million (something like that)
House was on the market for either 100% sale @ 6 million
or
Broken down into shares, people could buy a % and make money from the rental it would take in.
30k investment was worth x return each year.

Might not have been a big money maker but I did think it was an interesting approach to selling a house / investment opportunity

jimmii

I did one project with The House Crowd in the UK which it sounds like that Rathmines one was taking inspiration from. They've done quite a few projects now seems to be going well for them even if they did get laughed out of Dragons Den! The way they work is shares of £1k then you buy it project by project and normally you can either choose to get a fixed return of 7.5% or just take an equity stake and get your % share once its sold.

Voltex

These are the sort of guys to you need https://www.linkedfinance.com/

I heard them on the radio a few weeks ago and found it interesting. Looks like they have commercialised crowd funding in a nice way.

jimmii

Voltex wrote: »

These are the sort of guys to you need https://www.linkedfinance.com/

I heard them on the radio a few weeks ago and found it interesting. Looks like they have commercialised crowd funding in a nice way.

Yeh posted them above but they look for companies trading for 2+ years.