Seeking €800k Investment

[El Empresario]

I am seeking investment for a new business venture. My idea is to open fast-casual restaurants in Spain and Portugal serving a type of food no other chain does at the moment. The food is not unique to the fast food market but my concept would be.

I have two sites secured and ready to begin. I have calculated all the set up costs for these two sites. I have also done projections for the first three years. I have also done some practical research on my concept.

I am looking for an investment of €800k to be drawn down in stages. I have property assets which are valued at €800k which I would put up as security. The obvious question is why not sell and use the funds? The assets are in the form of front-line plots of land on a Golf Course resort which is at an early stage of development. In the present property climate and the stage of the resort it would bring little return on my investment. In an ideal situation it would be wise to develop or sell the plots in 2/3 years.

I am 42 years old and relocated to Spain 18 months ago. Prior to moving I have been in retailing (my own businesses) for 10 years and also have a years experience of owning and running a restaurant.

The investor would be given a share in a new company that would be formed and the investment secured against the land. The size of the share will depend on how the investment is structured.

If anyone can offer me advice as to the best way forward with this I would be grateful.

 

[Alice3537]

Interesting venture - sadly, I wouldn't know which direction to point you in, but wish you all the best with it!

btw - I understand totally why you wouldn't use the assets for the investment and I imagine most of the others here would as well!

 

[INDIZINE]

This must be the only decent investment opportunity ive seen on here, ever!

Must be because it does not claim you are going to make £300k in year 1!

 

[Chris Ashdown]

Why not just start with one site and fine tune the plan for half the cost

What amount would you be putting into the plan in money,property is hard to value and can be hard to sell, few investors would look at less than 50-51% shareholding in a new venture to safeguard their investment

 

with 800k security I would think a bank would be interested and you would not have to give up 50% of your business.?

Earl

 

[Chris Ashdown]

I understood he was looking for an investor

Even so land and housing prices in decline in Spain, who values the land

UK banks i guess not interested in oversea's lending

 

[El Empresario]

Chris, I understand your point re land values and difficulties in selling. But the valuation is based conservatively on today's prices. Although property prices are suffering in parts of Spain, it is not the case on the Spanish Algarve.


Prices are not increasing at rates seen in the last few years but equally they are not falling either. I think what happens on the Costa del Sol is often reported as a generalisation for the whole of Spain.


With regard to my personal investment, I have already invested around €80k in acquiring the two sites and on various other expenditure. I could make more funds available but it would depend on the deal.


Banks are willing to lend but not as much as I am seeking. I would prefer to involve an investor, with a stake in the business, as this would not put as much pressure on the venture especially in the early stages.

 

[adventurelife]

A combination of several of the replies above.

I would be very surprised if an investor would put up 800k on a concept that is not yet trading. Those that will put up the cash and buy into you as a person and businessman, and can see a big roll out of many sites will still want the majority shareholding. Are you prepared to give up control and also potentially lose your 800k worth of assets?

If I was you based on the information you have presented I would be more inclined to develop one site backed by a bank which will lend as you have 800k of security.

I would ensure that site worked and is producing high profit then you would be in a better position to get better bank funding, and if they will not play at that stage you can look for an investor and you will not have to give up the majority shareholding in your business.

The way your a currently structuring the deal makes me think you could be in for a lot of pain further down the line unless you get an investor who you know very well.

 

[smartpr]

Hi,

Can I ask, would you be targeting Spanish and Portugese natives, or ex-pats and tourists? Or both?

 

[El Empresario]

Smartpr, my target market is primarily locals but it would appeal equally to the tourist & ex-pat markets.

Adventurelife, I take on board what you say. I am not seeking 800k straight away, I would draw down as the roll-out proceeded. This would then give any investor more confidence in me and the concept as we would have units operating, hopefully profitably.

The reason of having the security is to increase the confidence of investors in myself and the concept. Do you think it would be reasonable for an investor to ask for a 50% stake and have their investment secured?

 

[adventurelife]

Smartpr, my target market is primarily locals but it would appeal equally to the tourist & ex-pat markets.

Adventurelife, I take on board what you say. I am not seeking 800k straight away, I would draw down as the roll-out proceeded. This would then give any investor more confidence in me and the concept as we would have units operating, hopefully profitably.

The reason of having the security is to increase the confidence of investors in myself and the concept. Do you think it would be reasonable for an investor to ask for a 50% stake and have their investment secured?

Not if the business was already producing results but what you are asking is to invest in a complete startup. The investment being secured on the land is a huge upside but as the investment is going to be in draw downs I can see a lot of legal issues. Will all the land be offered as security at the start or in parcels as the draw downs happen?

A lot of investors will judge that you do not need investment at this stage as you have security so you can use other means. For the concept to return an excellent ROI I take it the plan will to be have a roll-out across the country. This will involve 2nd and 3rd round investment which means your selection of initial investor is even more critical.

Obviously the 800k will be based on the likely value of the company in the future to determine the % but I would still expect any investor to go for a very high % based on what you have said.

You could drastically reduce that % by getting the first one up and running and proven and you will also have a much wider range of investment partners to work with if you do that.

 

[El Empresario]

Adventurelife,

Thanks for your input and advice. It is my first time in seeking outside investment for venture and it is good to get feedback.

With regard to the land and security I had envisaged putting all the plots as security in one go, so that the deal would be set up right from the start.

 

[JonM]

This is the membership list of the British Business Angels Association. Don't know how much use it'll be but its a start:
http://www.bbaa.org.uk/portal/index.php?option=com_contact&catid=20&Itemid=57

You could also try 3i http://www.3i.com/index.html

This is the membership list of the British Venture Capital Assoc ('A' only)
http://www.bvca.co.uk/index.html

A google search also reveals firms who will match you with Angels for a fee - I don't know if they are of any use (maybe other members will be able to advise) and you might feel that £99 is worth a punt, although experience tells me that life isn't that easy...

Hope this helps

 

[El Empresario]

Thanks Jon, I have looked at a few of those sites already, I haven't tried the 'paid for' sites. I don't think people like 3i would consider it, because it is too small scale for them, I think some of the Angels are more of a possibility.

I have pitched it to a couple of sites today and I will see what feedback I get.

 

[adventurelife]

Adventurelife,

Thanks for your input and advice. It is my first time in seeking outside investment for venture and it is good to get feedback.

With regard to the land and security I had envisaged putting all the plots as security in one go, so that the deal would be set up right from the start.

Because of the sums involved and the endless hours of work and grief you are about to undertake it goes without saying that professional advice and an excellent legal team will be required. They may seem expensive but could save you a lot in the long run.

I wish you luck

 

[JonM]

Actually the BVCA (British Private Equity and Venture Capital Association) website looks useful and may help others so just to clarify http://www.bvca.co.uk/index.htmlwill take you to the home page.

To access the member list, click on the 'entrepreneurs' tag at the top, highlight 'directory search', and then click on 'complete list of members' tag on the left. It'll then be a lot of work to go through the membership but the BVCA provides an awful lot of info as well as links to their members websites.

 

[El Empresario]

Does anyone have experience of working with venture capital / business angels? I was wondering how long the whole procedure takes?

 

[El Empresario]

Just an update on old thread, I started my first unit 8 weeks ago and our turnover is above our break-even target. We are achieving growth week on week, but we will see what the longer term holds.

 

[da8iwr]

I have often admired how companies like the Newcastle based "Gregg's" has taken over the UK in the last few years, by purely buying other companies and spreading with a simple formulae that works and sticking it to it.

I love the idea of having one shop, and working it until you can afford to get another place, then having a small industrial unit that supplies the 2 small units with food and ingredients like Gregg's, McDonald's, Burger King, KFC, in fact all the successful food companies.

When i was a student i worked for one Pizza guy delivering, but he owned a whole road of pizza shops all with different names etc, about 12 of them i think. Each shop used to open at 4pm, and work until 6 pm, making a specific ingredient. Either dough, chopped veg like onions or peppers, making garlic sauce or chili sauce etc. Then at 6pm all the staff from each shop would run around the street crossing the road with huge tubs of their ingredients delivering it to all the other shops he owned. So each shop then had all the ingredients it needed to make the products.

Each shop then only needed fridges and one piece of equipment which produced that one product, not a dough mixer, a chopper, and all the other things that uses up floor space. So each shop was small, just a tiny little place, but would sell as much as the bigger fast food shops that had the massive over heads. He also had a huge part of the City cornered, so anybody wanting a pizza, one way or other would hit his shops. The guy who owned all them shops, was a multi millionaire and still doing very well.

It was amazing listening to them talking about how one was much better than the other, when actually they were identical and made by the same person in all shops.

Gregg's are similar, they have a factory in a low over head area that produces all the food and half bakes it, then on a night delivers to all the outlets, so the smaller (high over heads) shops dont have to actually do anything but throw them into an oven and bake it, to give the freshly made appearance and smell.

Very clever.

If you could get the financial backing from a bank, to get one of your outlets working, on your own with no investor, you only need lets say 200K on the back of your 800K worth of land, this will then allow you to show an investor in the future

• We have a £100,000 turnover on one shop
• with £50,000 profit before tax
• And £25,000 after tax (just an example)

But if we had another outlet which is what we need the investment for, this will produce -

• £100,000 turnover
• with £75,000 profit pre tax (per outlet)
• and £50,000 after tax

So you can see every time we add an outlet our profits go up by 150% the amount of the first outlet, not the 100% as if we were carbon copying the first outlet.

You would have investors queuing up at the door.

As you have proven to them

• It works
• People want it the business type
• People like the food and menu
• The area is right
• The shop layout works
• Your able to run and operate the business
• You can find the right staff to help you make it into the business you want.

I'm sure you already know this stuff, but from experience of securing 2 investments, one last year for £250K, i think this is what you need to show.

Ive never really heard of any serious investments on an idea, even with a bit of equity sat there. If somebody wanted to buy into land, they can go to an estate agents and buy some. An investor will only work with figures and number that he can are working, not from a business plan.

Now I'm assuming a lot of things up there that you haven't told us about your plan of course, but in general that's what an investor will need to see before letting go of that kind of money.

 

[da8iwr]

Does anyone have experience of working with venture capital / business angels? I was wondering how long the whole procedure takes?

I was fortunate, an investor found me, long story and makes interesting reading, but will draw this of on a huge tangent.

Using Venture capital companies, is a long procedure, a friends of mine did it, and it took him about 6 months from them accepting the idea, to actually signing the contracts.

Just an update on old thread, I started my first unit 8 weeks ago and our turnover is above our break-even target. We are achieving growth week on week, but we will see what the longer term holds.

That's great news, you posted this whilst i was writing my bible length post above.

If you can make profit in about 8 weeks, and you can see a steady growth, do you actually need an investor?

Also is this growth due to the tourists that are there now during the summer, or should this trend continue up and over winter as well?

 

[martin001]

A google search also reveals firms who will match you with Angels for a fee - I don't know if they are of any use (maybe other members will be able to advise) and you might feel that £99 is worth a punt, although experience tells me that life isn't that easy...

Hope this helps

I guarantee you will spend lots of £99's for a few hotmail.com email addresses and have little chance of getting an investor. I should know, I have tried serveral times with several businesses. That's if ther are talking about angelinvestmentnetwork, but then there might be a few positive stories to come out of there too. - Sorry, - Im taking this off on a tangent! - carry on!

 

[El Empresario]

Thanks for your input Da... I appreciate your advice. Yes some of our turnover is from the summer holidaymaker trade but mostly it is locals who live here (Brits/Spanish).

We have done no advertising as yet and all our customers have come via recommendations / word of mouth. We didn't advertise on purpose, because I didn't want to be overrun and have a bad reputation before we got of the ground. Now things are more settled we are planning a marketing strategy.

 

[El Empresario]

I guarantee you will spend lots of £99's for a few hotmail.com email addresses and have little chance of getting an investor. I should know, I have tried serveral times with several businesses. That's if ther are talking about angelinvestmentnetwork, but then there might be a few positive stories to come out of there too. - Sorry, - Im taking this off on a tangent! - carry on!

Martin,

I couldn't agree with you more, I looked at various websites offering input from 'Investment Angels' and most just looked like scams.

 

[alicanteman]

What type of food will you be offering ?