High Risk/High Reward Punt?

[Falbrav]

Good morning,

Having not graced the UKBF for around 8 years, I have been consigned to creating a new account. Rest assured though, I am not new to the Business Forum and, as such, would like to get your thoughts on the following;

Over the past couple of years I have been working on a new concept for a web app in a field that I am very familiar to. Whilst I know there is nothing like it on the market (how many times have you heard that?) the cost for developing such an app and bringing it to fruition is out of my financial reach at present. Therefore, I will at some point, hopefully in the near future, be seeking investment (I have been gifted a couple of avenues to pursue at present).

Having said this and, without going into too much detail, I rather see my web app as a high risk/high reward punt from an investors perspective as well as a personal one. Apart from the initial outlay for building the app, the only real ongoing cost would be for marketing which would predominantly be focused online.

I am extremely confident that my idea can disrupt the market and challenge the status quo of this particular industry. Although, due to the nature of the business, I'm struggling to see how anyone, including myself, could sit down and write a structured, well intended business plan for such a venture.

As this would be the first time I have tried to secure investment for a business, I am genuinely intrigued as to whether (potential) investors would ever buy into an idea/concept/person, as opposed to a 20 page document. Would it be worthwhile for me to consider putting up a personal guarantee that any monies invested would be paid back and would this be conventional?

I would gladly welcome any thoughts and advice on the gaining investment process.

 

[fisicx]

Investors are looking for a return. They aren’t interested in your app only the money it will generate.

Which means they want to see the MVP and the business plan.

If you don’t have the funds or skills to do either then your idea is a non-starter.

Consider also they there isn’t anything like this because it’s already been tried.

And the app is the minor cost. Marketing costs will be far higher.

 

[Falbrav]

Thank you for your reply, fisicx.

Your thoughts are always kindly welcomed.

I am the first to recognise that investors want to see a return on their investment. That is why I thought about the possibility of providing a personal guarantee for the monies they would be investing. That way there is no risk to the investor regardless of whether the idea sinks or swims. Worse case scenario they get their money back, or should the idea take off and be a success, they are quids in.

The year is late 2003/early 2004, how would you go about writing a business plan for Facebook, for instance, as it is yet to launch?

Whilst my idea isn't a social network (and has nothing to do with Facebook!) there are definitely parallels that can be drawn between the two ideas with regards to how one would go about starting a business plan and the likes. This is the point I am trying to make.

I fully appreciate and take note of what you mention with regards to marketing costs, however.

 

[NickGrogan]

Yes and no.

There is a very well-known computer game from the mid 90s whose entire pitch consisted of three words. They got funding, marketing, and publishing support.

But they had a track record of creating games that sold, and they knew exactly what they were doing.

It was still a risk because there was nothing like that game at the time, and the rewards were high.

So it's possible if you have a team that investors would buy into.

But your app sounds a bit vague. Disrupting industries is all well and good when you've got money to burn, but you need to show where the money is going to come from and when.

Not sure how a personal guarantee would work. If you've got the money to guarantee it, why not fund it.

What sector is it in?

 

[Mark T Jones]

It is often repeated on here that investors invest in people and businesses - n I think ideas or products.

I'd suggest you focus now is mostly around market research on percetion/acceptance/competition for your app.

Once you have a clear view on how it will roll out, you need to demonstrate your ability to make it happen

 

[WaveJumper]

Not sure I understand what your problem is, you write up your business plan based on the idea you have, how its going to work / perform the possible future bolt on's like advertising revenue etc etc. The biggest headache will be determining how much to lunch a new idea and this is where costs could well become astronomical.

The right investor is going to recognise a good idea and its future potentail when they see it .....if you are pitching to the right audience of course. A big but though for me would be don't use the term "it will disrupt the market" as I am all ready heading for the door.

 

[Falbrav]

The sector is sports, but more specifically sports data. The concept I have been working on predominantly focuses on how professional and recreational bettors both access and consume sports data with regards to betting. Having worked in the industry for the past 7 years and studied betting form for the past 20, I have reimagined the way form is presented and analysed to ultimately allow bettors to make more informed, well-judged decisions.

 

[NickGrogan]

Hmm, given that most of the money in sports betting is made when people lose bets, something that will help them make better, more informed decisions seems to go against the money. Unless it makes them "think" they're making better decisions, but they still lose.

If the betting companies don't like it, who do you see funding it, buying it and using it?

 

[Falbrav]

I never said that betting companies would like it, in fact quite the opposite. But lets not forget that a large percentage of people now bet on Betting Exchanges such as Betfair, Matchbook etc. (betting against other people) and not against traditional bookmakers.

 

[fisicx]

Doesn’t change the fact that unless you can demonstrate viability and income to an investor they won’t be interested in your app.

 

[NickGrogan]

I never said that betting companies would like it, in fact quite the opposite. But lets not forget that a large percentage of people now bet on Betting Exchanges such as Betfair, Matchbook etc. (betting against other people) and not against traditional bookmakers.

I'm not bothered who likes it either, but you are looking for someone to fund it. They've got to like it to fund it.

Betting companies - Nope

Betting exchanges - where I bet against you, don't seem like a likely avenue either. If they make it available to everyone then we're both better informed and so less likely to bet against each other or at all. The closer you get to perfect knowledge, the less sense the opposite bet makes. If they give it to some members and not others, then betting against those members becomes a bad idea, too. Any bets are going to be at closer odds, so winning becomes less profitable, and margins are squeezed.

Gamblers—If they make better decisions, they should win more, but that's a large and disparate group. There is no obvious way to target them for funding, and the more people you sell to, the less valuable your offer becomes.

Who else is your customer?

 

[Falbrav]

My customers are the tens, if not hundreds, of thousands of users who log onto the Racing Post and Timeform (amongst other form providers) on a daily basis to study.

I am essentially offering the same information, just making it interactive and easy-to-read in a highly-unique format that's not provided by the mainstream big-boys.

 

[NickGrogan]

That's okay, but you won't get funding from the hundreds of thousands of users because it's hard to target them, and individually, they won't benefit enough to make the investment worthwhile. Not sure if Crowdfunding would work, or be allowed for gambling.

What about the form providers - Racing Post, Timeform, etc. If they had it exclusively, would they benefit?

Would the benefit be enough to make it worthwhile?

 

[Mark T Jones]

My customers are the tens, if not hundreds, of thousands of users who log onto the Racing Post and Timeform (amongst other form providers) on a daily basis to study.

I am essentially offering the same information, just making it interactive and easy-to-read in a highly-unique format that's not provided by the mainstream big-boys.

How will you reach them?
What are they currently using/doing?
What are realistic price-points?
What is the upsell / recurrence?

At this point, I'd say you need to move away from product and into marketing focus - because that's where the business is.

 

[Fagin2021]

My customers are the tens, if not hundreds, of thousands of users who log onto the Racing Post and Timeform (amongst other form providers) on a daily basis to study.

I am essentially offering the same information, just making it interactive and easy-to-read in a highly-unique format that's not provided by the mainstream big-boys.

Which raises the question 'If the App is successful, what's to stop a 'mainstream big boy' from replicating it ?'.

 

[BusterBloodvessel]

I see no reason with any of the above why you can't write a business plan? Why can't you write a plan showing what the app will do, how it will differ from what's out there now, how that will benefit consumers and ultimately how that will lead to downloads of X quantity and subscribers of X generating revenue of Y. Backed up by market research.

Just because something is new doesn't mean you can't research the demand for it, determine a market size and what people would be willing to pay, and then present that in a business plan.

I'm afraid it sounds more like you can't be bothered doing so or don't fully believe in it yourself.