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Would you take on an investor?

  • Thread starter Thread starter Dave Hybrid
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Dave Hybrid

Hello all,

If you could, would you take on an investor in the early stages of start up?

My business is growing but with an investor it would help, I think.

I know someone locally who has had many successful businesses and whom I have worked for in the past, doing IT.

I'm thinking of approaching them, but, not sure if its worthwhile and a good idea at all.

What do you think?

Dave.
 
It all depends really doesnt it Dave. You would have to discuss with them the potential that your business has got also what there investment would bring to the company. You would have to think what the benafits would be. Useually investors want a % of the company so you would have to think seriasly about it.
Wish i could help you more. :)
 
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I'd try to get it as far as possilbe without investment as the later more developed your business is (proven track record/market, existing customers/orders), the better the deal you will get.

But invariably, yes. I'd rather have a small slice of a king size fray bentos steak and kidney pie than a whole miniature mince pie : )
 
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Thanks for the advice, i have got the business to a point where I can survive, but, I don't have the funds to advertise and market it further. Maybe over time it will grow from referrals and repeat business, but, I'm scared it will become stagnant without the proper investment and growth, I'm also very ambitious and without funds feel I'm wasting time.

I'm pretty sure the investor would be interested and he has owned an IT company before (the one I worked for).

I think its probably best for me to approach them anyway, its not like I'm obligated to do anything.

Cheers guys!

Dave.
 
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Get a solid sales forecast and marketing plan together first so you can answer any questions he might have. Have a good idea of how much you need, what ot will be spent on (marketing plan) and what the return will be (sales forecast)

Good luck with it.
 
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Thanks Duane, good advice.

The problem is altho' I'm pretty good with IT issues, my business expertise is not great, writing a sales forecast and marketing plan is an area I find difficult, any advice regarding this?

Cheers!

Dave.
 
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Without doubt. Better still if you can get an investor who can bring not only money to the table but expertise and time which is invaluable. bit like those who go Dragons Den asking for £150k to get their business running as they have taken it as far as it will go but will say no if the deal offered is 40% saying its too much....yeah right, you hit a brick wall so your making £0 but if I fund you £150k you get 60%(control) and every chance of making money.

Bit like saying better to have love and lost than not loved at all. 6 months ago I had tried in vain to get investors, now they are asking me to let them in!
 
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Shay said:
6 months ago I had tried in vain to get investors, now they are asking me to let them in!
Click to expand...

Funny how that happens. I was jumping through all kinds of hoops to get investment and not getting very far.

As soon as I got my investor and it became public knowledge (FT, Telegraph, The Business, Library House, etc - go Team 10 Yetis!) I also had lots of others wanting to get in on the action.
 
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Shay said:
Without doubt. Better still if you can get an investor who can bring not only money to the table but expertise and time which is invaluable. bit like those who go Dragons Den asking for £150k to get their business running as they have taken it as far as it will go but will say no if the deal offered is 40% saying its too much....yeah right, you hit a brick wall so your making £0 but if I fund you £150k you get 60%(control) and every chance of making money.

Bit like saying better to have love and lost than not loved at all. 6 months ago I had tried in vain to get investors, now they are asking me to let them in!
Click to expand...

That's what I'm after, someone to mentor me also and devote some expertise.

I have contacted my targeted investor, see what happens, will probably tell me to naff off, lol.

Dave.
 
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We've struggled hard to survive without any investors. The simple reason is that our company is really a mission and we don't want to give up control.

I have to say, though, that conventional wisdom states that an investor does help a business to get off the ground - by bringing on board experience as much as funding. Reading through the history of eBay, I learned that they obtained funding early on even though they didn't really need it.

So, it depends on the nature of your business, how quickly you wish to launch, how willing you are to relinquish some control, and how much you believe you need the experience that an investor brings.
 
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Dave if you are looking for some inspiration for your cashflow and marketing reports there are some good sample ones out there but at the end of the day, you have to take the bull by the horns .... be aware of how much you want from your investor and how much you are willing to offer him ... good luck!!
 
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I can see why people are reluctant to give away such big percentages of the company. When you have a new idea you have mindset that it will be a success and you will make Millions, most of the time shrouded in your own self confidence. If you get offered £100,000 for say 40% like on Dragons Den it feels like once you make your millions they will be getting a huge chunk of money you could of had for such a small amount of initial investment compared to the outcome of profit.

I'm not saying I agree with this mindset, it's just how people think.
 
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I was quite lucky, I found an investor for my Games Development Business on eBay of all places - having investment helps if you do not have any capital to pump into your business or enough to give it a good head start becuase your money is invested elsewhere - there is no reason down the line that the investor could be bought out, just make it clear in the agreement you have that he/she can be bought out for (x) amount of times the original investment, as you may get big enough to buy them out or another larger investor wants a slice of the cake but blowing the smaller investor out of the water. They get a return on the money and you get a more backing. Always make sure that you retain majority share in your business/company!
 
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Hi Dave,

Investors come in all shapes and sizes, you need to make sure you only let people into your business who can genuinely aid its' development. Too many "angel" investors turn out to be quite the opposite - so make sure you ask them as many searching questions as they ask you. if they're worth their salt, they'll recognise that a guy who knows what he's looking for is worth investing in. If they can't recognise that, walk away. If you don't they'll only get right on your doo-dahs in about 6 months time.

If your business is a startup they're only usually interested if there are already obvious sales on the books with prospects for growth. If there are no sales, they'll be funding "research" not a business as such. That takes a special kind of investor... and there aren't many of them around.

Also, there are lots of ways investors can invest in your business - it doesn't need to be equity.

If you can get a good one to invest in YOU, and you have a clear understanding between you of what is to be achieved, then go for it. if you can't reach that shared understanding with a potential investor - avoid at all costs.
Good luck!
Al
 
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I would consider an investor taking part of my business for the right deal. 50% of a lot is better than 100% of not a lot - isnt it? I have a team of investors looking at my business now with a view to injection of capital to either franchise it or expand it organically. If others are interested I would consider their proposals too. You have to take account of what other assets an investor would bring not just the money! :)
 
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I couldn't agree more, the only reason I have considered this investor is because he has been and is involved in mobile phones, computers and electronics so not only will he have money he has an interest in the same areas as me and my business.

I also have worked with him in the past for two of his companies so it makes him rather more approachable, which helps as selling myself to investors all seems rather daunting.

Dave.
 
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DuaneJackson said:
I'd try to get it as far as possilbe without investment as the later more developed your business is (proven track record/market, existing customers/orders), the better the deal you will get.

But invariably, yes. I'd rather have a small slice of a king size fray bentos steak and kidney pie than a whole miniature mince pie : )
Click to expand...

I'm in the early stages of start-up and am working on a business plan that will involve investors. I believe they can significantly reduce the time it takes to market, and I agree that a small slice of a big pie is better than a whole inadequate pie. As long as your exit strategy gives you what you want, then go for it. Martin Morris
 
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I dont think anyone can really tell you whether it is or isn't a good idea without knowing LOTS more about you and your business.

My only advice from having been through this loop and not being successful is you can waste a LOT of time getting nowhere. I would therefore suggest you go for it if it feels right but keep careful track of the effort you put into any talks and plans etc.
 
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I think as has been mentioned if you can get the money *and* the mentoring it is well worth it. Just be careful of the actual costs involved in doing shareholders agreements and all the legals as this *can* get very expensive and Im speaking from experience here!

Good Luck

Gary
 
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Well.....

After a lengthy telephone call with my old boss, I have a meeting with him to discuss things further.

Looking good. :)

Anyone have a pointers..? I always hear on Dragons Den never give away more than 49%... or I will lose full control... is it a definite no no?

Dave.
 
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1) Always retain the majority share
2) Always have a buy out clause so that if you get a bigger investor later, you can buy them out. Quite a few investors will settle for 3 times the amount they originally invested, or you could just play it safe and say 1, then negotiate.
3) Dont sell yourself short by jumping in with "I'll give you 30%" when you could easily get away with 10%.
4) How much of a return are you expecting your investor to get, thousands or millions? Then decide how much of a percentage you are willing to give them. Otherwise they may not be what you are looking for, and yes it may be your only opportunity at this moment in time, but you may well get a better investor down the road for less of a percentage of your business.
 
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Be very clear on what you would use their investment for and how much of a return they can expect. With many sole trader businesses in the service industry there is little scope for a multi million pound enterprise so be realistic in the growth potential of the business for the existing model. Most investors are seeking a return within 2-3 years and will only fund specific activities not day to day cash flow requirements so be aware there needs to be a lot in it for them and you need to sell it to them.
 
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This is interesting as I am also in negotiations with a business syndicate looking at investing in my business as a business and also with a view to opening it up as a franchise. Very exciting!!
 
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Personally I dont expect to keep a controlling share. If the investing partners can provide the expertise and monetary investment to take it to a much higher level, then it is worth losing control to have a smaller % of a much larger cake!!!
 
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Don't give up your controlling share if you already have a decent Business. If they know it makes money they will provide funding for a lower percentage. You could seriously end up regretting it, it wouldn't be your business anymore, it would be the investors and their decision goes.
 
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Dave

A few suggestions from someone who helps companies find investors...

- don't be too precious about giving away shares, get the investment and make it happen!
- don't rely on the "Dragon's Den" type of shareholdings either, the +/- 40% they often negotiate is generally speaking on the high side (I have had 3 clients on Dragon's Den)
- find someone who can add to the business by introductions or skills or experience, that might be worth more than the money in the long run
- you must have an investor-ready business plan before talking to investors
- consider the Small Firms Loan Guarantee scheme (SFLG) as you don't have to give up shares, though you do need to have started trading first

If you want a second opinion on your business plan for investors or SFLG, or want help with your business strategy or putting a plan together, let me know :)

John
 
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