Do investors invest in Ideas/potential

[WHARTY]

Hi everyone.

I was wondering if investors are interested in business opportunities that are no more than ideas or have a lot of potential and of course have a solid business plan?

Long story short i designed a vending machine a few years back that got a lot of interest. The problem was i designed the product it was selling around the machine. I did this because i was told the product i wanted to vend couldn't be vended on its own and had to be vended as part of a pack.

The product was Glowsticks. The glowsticks were too small and delicate to go through a mechanism without activating/glowing.

I decided to put the glowsticks in a pack that contained other glow novelties like glow glasses, bracelets and necklaces. This bumped up the vend price and put a few customers off. I suppose i was blinded by my enthusiasm and should never have been dictated to by the people who said what i wanted to do couldn't be done!

So i guess i join many business men and woman in saying my first business was a little failure.

So basically fast forward 2 years or so and i have figured a way not only to vend the single glowsticks etc but pretty much any of the novelties that are sold in toy vending machines around the country. The best bit is there is no vending mechanism as such! This means no products can get jammed (100% vend guarantee) and the glowsticks wont be activated during the vend process.

At the moment you need (as a vending machine operator) a number of machines to vend different products. Capsule machine for capsulated products, Sticker machine for stickers etc. My machine will do all the major novelties including bouncy balls and sweets without the need to buy multiple machines. In fact the capsulated toys dont need capsules to hold them so reducing packaging costs.

I am really excited about my Eureka moment and have shown a couple of trusted business minds who were very impressed (although not impressed enough to invest on something unproven!)

So what do you think? I know i have asked questions along these lines before but the idea wont go away and i really want to get the idea out of my head once and for all!

So do investors go for unproven, good ideas with a good business plan???

Cheers, Lee.

 

[ScotComp]

Hi Lee,

Have you thought about approaching your local Business Enterprise rep? A lot of them can help you develop a business plan and put it towards financing that would work out for you, for example they may suggest business angels or may even be able to recommend some sort of a grant or loan you may be able to get.

Investors do invest in ideas (It's happened to me with another business idea) but there needs to be a solid business plan to show them how they'll get their money.

 

[vvaannmmaann]

Do the young people still use glow sticks in the discotheques?

 

[WHARTY]

Hi Lee,

Have you thought about approaching your local Business Enterprise rep? A lot of them can help you develop a business plan and put it towards financing that would work out for you, for example they may suggest business angels or may even be able to recommend some sort of a grant or loan you may be able to get.

Investors do invest in ideas (It's happened to me with another business idea) but there needs to be a solid business plan to show them how they'll get their money.

Not even heard of a business enterprise rep if i am honest but look it up so thanks. Good to hear investing in ideas is possible.

 

[ScotComp]

I was thinking the same thing, I don't remember glow sticks being that popular?

 

[ScotComp]

Not even heard of a business enterprise rep if i am honest but look it up so thanks. Good to hear investing in ideas is possible.

In Scotland we have Business Gateway who offer a huge amount of advice on marketing, funds, legal aspects etc.

I'm sure you'll have something similar, some sort of business advisor.

 

[WHARTY]

Do the young people still use glow sticks in the discotheques?

That was one of the issues in the nightclubs.

I designed the machine originally for nightclubs and bars (student areas).

I had my machines in the likes of Walkabout, at least 5 Luminar venues and various other big chains. The machines took anything from £6 to £30 per week but not on a regualr basis. I always had sales but not enough. The problem was the price at £3 a tube. You got a lot in the tube though. 2x 6 inch glowsticks, a necklace, bracelets and some stupid looking glasses but people thought they were great.

If i could have vended the products seperately for say a £1 each i would have done very well. (now i can vend them seperate)

Once i had finished my trials in the clubs etc i went to the likes of Butlins, Tenpin and Planet Ice to aim the machines at the kids.

Now these machines took up to £400 in a month but the problem was again the price but more important was the fact all these venues sold the products themselves in their own shops. This meant even when i offered them a 50/50 share i could never compete with the margin they were making on selling the products seperately in the shops from their own wholesaler.

The Glowsticks and other glow novelties were very, very, very popular.

One of the other chains that i wont mention on a public forum, really liked the idea but told me that all the products i had in the one tube sell seperately in their shop for around £10!-£12!!! (i was selling for £3 and only offering 50% commission!)

All agreed they liked the concept and even though they knew they wouldnt make as much money as opposed to selling the products themselves, they still trialed it.

So now i can vend everyhting seperately plus lots more products i have run out of money to design the new machine!

A few other points to remember are the high shrinkage levels of the glowsticks and small toys. They break easily, get stolen by staff and customers and they also take up a lot of shelf space that could be used or other products.

My machines also sell more of the glowsticks than the shops because they are in the disco areas when needed(it's dark) as opposed to a bright summers day at 10am when kids just want to spend their pocket money the minute they get it (not wait 10 hours for it to go dark) The machines flash away and get attention rather than a few glowsticks placed on a shelf among 100 other product lines.

Sorry for wittering on!!!

 

[Psl]

Hi Lee,

I am glad to see you have stuck at it and it looks like you solved all the problems

Getting investors on board is always a long hard slog but I am a big fan of the Seed Enterprise Investment Scheme for start ups, see here for more info http://www.seis.co.uk/

I would take your idea, business plan and any IP rights, patents etc and place it in a new Ltd and issue 3 shares.

The basics of the SEIS are that investors can invest a max of £100k but the company can raise £150k.
The investors get 50% tax relief and 28% capital gains relief.
The partner at the accountancy firm that I am dealing with told me that if the business fails, the investor can get further relief on the investment loss so that reduces the risk for the investor even more.
The investor can only have up to 30% of the shares of the company.

Apply for the Assured Assurance Certificate under the new Ltd. see here http://www.hmrc.gov.uk/forms/eis-aa-bw.pdf

The Assured Assurance Certificate decreases the risk for investors and acts as a semi-binding declaration that the company will qualify for SEIS relief. It is important to get an accountant that understands SEIS to help you through all this process.

From what you have said about your product and your potential markets and
whilst all the above is being sorted, I would approach companies like Pontins, Haven and other holiday camps. You can do this by email or on the phone and follow up with a meeting.

Your goal in approaching these companies is to get their interest and a Letter of Intent if possible. This will all help to get investors on board.

Will your new vending system benefit existing vending companies? If yes, there is another route to market.

Once you have gone through all of the above then you need to get your investors.
You could get them via the accountant you use, you could approach other accountancy firms and you could use this site http://www.seedeisplatform.com/

Good luck and keep at it and you will get there in the end.

 

[WHARTY]

Hi Lee,

I am glad to see you have stuck at it and it looks like you solved all the problems

Getting investors on board is always a long hard slog but I am a big fan of the Seed Enterprise Investment Scheme for start ups, see here for more info http://www.seis.co.uk/

I would take your idea, business plan and any IP rights, patents etc and place it in a new Ltd and issue 3 shares.

The basics of the SEIS are that investors can invest a max of £100k but the company can raise £150k.
The investors get 50% tax relief and 28% capital gains relief.
The partner at the accountancy firm that I am dealing with told me that if the business fails, the investor can get further relief on the investment loss so that reduces the risk for the investor even more.
The investor can only have up to 30% of the shares of the company.

Apply for the Assured Assurance Certificate under the new Ltd. see here http://www.hmrc.gov.uk/forms/eis-aa-bw.pdf

The Assured Assurance Certificate decreases the risk for investors and acts as a semi-binding declaration that the company will qualify for SEIS relief. It is important to get an accountant that understands SEIS to help you through all this process.

From what you have said about your product and your potential markets and
whilst all the above is being sorted, I would approach companies like Pontins, Haven and other holiday camps. You can do this by email or on the phone and follow up with a meeting.

Your goal in approaching these companies is to get their interest and a Letter of Intent if possible. This will all help to get investors on board.

Will your new vending system benefit existing vending companies? If yes, there is another route to market.

Once you have gone through all of the above then you need to get your investors.
You could get them via the accountant you use, you could approach other accountancy firms and you could use this site http://www.seedeisplatform.com/

Good luck and keep at it and you will get there in the end.

Hi mate thanks for all the info!

Going to sit down later and try and digest and understand it all!! I have a good accountant so will run it by him too. Cheers

 

[Psl]

Hi mate thanks for all the info!

Going to sit down later and try and digest and understand it all!! I have a good accountant so will run it by him too. Cheers

I am happy help Lee

It is not that hard to digest but a good accountant will smooth the process and they may just have an client that needs to mitigate a tax bill and they could be your investor

 

[WHARTY]

I am happy help Lee

It is not that hard to digest but a good accountant will smooth the process and they may just have an client that needs to mitigate a tax bill and they could be your investor

Uhmm now the "Mitigate a tax bill" bit doesnt take time to digest!

I know one person who may be able to make use of it and the info you have given me, may well help me persuade him!

 

[Talay]

This reminds me of one of the few occasions I watched Dragons Den. The candidate there had a system to turn off the electric with a remote control, thus saving the standby electric waste.

The response from that tall guy was that whilst it was a great system, the cost would prohibit people from buying it. However, if you could go back up the chain a little and put these inside the TVs, dvd players, stereos etc., then you could shift infinitely more of them and thus reduce prices so far as to make take up much more achievable.

It doesn't look as though that ever came to fruition as yet but the idea of installing the functionality in new machinery and potentially offering a retrograde installation, might get you to a more profitable market.

 

[WHARTY]

This reminds me of one of the few occasions I watched Dragons Den. The candidate there had a system to turn off the electric with a remote control, thus saving the standby electric waste.

The response from that tall guy was that whilst it was a great system, the cost would prohibit people from buying it. However, if you could go back up the chain a little and put these inside the TVs, dvd players, stereos etc., then you could shift infinitely more of them and thus reduce prices so far as to make take up much more achievable.

It doesn't look as though that ever came to fruition as yet but the idea of installing the functionality in new machinery and potentially offering a retrograde installation, might get you to a more profitable market.

Or you could have a remote that turns the TV off and not to standby?

 

[drdes]

Is your idea patentable?

If yes then I would suggest the first thing you need to figure out is what your business model. Is it

(a) a manufacturer of these vending machines (and selling the machines)
(b) a manufacturer and operator of these machines (more complex but clearly possible)

That will hep you to raise money since it will drive your business plan

You do have the option to go it alone - if the idea is patentable, I would seriously consider a licensing agreement here you pick up a small % of sales. Will still cost a bit but less than other options

 

[dharm999]

why try to sell it to clubs, etc..? I would have thought that if you havve invented something that revolutionary, then why not sell/licence the design to a manufacturer? Trying to sell it to lots of venues sounds like a lot of hard work, for little reward. Getting a %/££ value of each vending machine sold surely would be less hassle for you? also can your invention be retro-fitted to exisiting machines? If so, that must open up a huge market for you?

I'm not having a go, just trying to understand your business model. If a venue is only earning a couple of hundred quid a month, is that worth it for them, given the time and effort involved?

 

[businessfunding]

To be honest I haven't read the other replies

the straight answer to you your question is that investors invest in potential - the more evolve the business the greater the potential will be

serious investors are looking for a multiple of, say 5X their investment over a 5 year period - can you deliver this?

 

[Moneyman]

pm me if you like. I know a bit about vending and have a good contact who might help. The idea is ok. it is the figures and cashflow which is of interest to see if you have looked at the costs properly.

 

[justbought.it]

So do investors go for unproven, good ideas with a good business plan???

Hi Lee,

The term investors is a little general as investors come in all shapes and sizes. There are 2 man types of investors though:

1. Venture Capital
2. Angel

Both types of investors do go for unproved ideas. So to answer your question, yes.

Be warned though that a VC will reject 99% of applications. Early stage is all about the team and won't invest in people who haven’t been recommended to them by someone. So, ensure you call upon your existing network.

I hope that helps.

Cheers,
Glen.

 

[Moneyman]

Take me for instance. i fund startups and proof of concepts and prototypes. but the further you are from a final plan and a running company the greater the risk and thus the greater amount of the company you have to sell to raise the funds.

 

[WHARTY]

Take me for instance. i fund startups and proof of concepts and prototypes. but the further you are from a final plan and a running company the greater the risk and thus the greater amount of the company you have to sell to raise the funds.

The first stage i am looking at is feasability by building a prototype. I don't know for certain that the machine will work until i have a prototype. The products i want to sell are no different to an other already being sold but its how those products can be vended and the versatility of the machine that will save operators an awful lot of money.

It will take somebody with a lot of vision to see what i am trying to do but once you can see it you will be impressed.

Obviously i had a business (small) with my first machine but lessons have been learnt.

 

[Psl]

The first stage i am looking at is feasability by building a prototype. I don't know for certain that the machine will work until i have a prototype. The products i want to sell are no different to an other already being sold but its how those products can be vended and the versatility of the machine that will save operators an awful lot of money.

It will take somebody with a lot of vision to see what i am trying to do but once you can see it you will be impressed.

Obviously i had a business (small) with my first machine but lessons have been learnt.

Lee, you need to get your prototype built PDQ. Getting it working right then the real hard work starts.

 

[Innovation]

Interesting Thread - just spent 2 years designing and developing a prototype - just travelled the road you will find yourself going down Lee if you are serious about developing your idea, its a little late now and getting a little tired , but will log in the morning, and if I can help point you in the right direction or help in anyway regarding your plans will gladly spend sometime going over my experience, I made some decent contacts throughout my journey and always eager to help others out if I can , I am quite new to this forum, but hopefully my experiences will help you move to the next level, at the very least will be food for thought.

 

[Talay]

Or you could have a remote that turns the TV off and not to standby?

If the remote turned the TV off completely, then there would be no residual power to turn it back on again. The idea was to retain a little power in battery form to serve as the kick start again, allowing the apparatus or series of items to be turned completely off.

 

[Moneyman]

I currently have two prototypes that i am funding at the moment. it is a hard long slog. Always keep in mind the cost of the product. The world is littered with £50 devices that solve a £5 a year problem.

 

[Innovation]

I currently have two prototypes that i am funding at the moment. it is a hard long slog. Always keep in mind the cost of the product. The world is littered with £50 devices that solve a £5 a year problem.

Sounds about right Moneyman - and could not agree more , have done a lot of research over the last 2 years and came across many of the devices you refer to , and guess this year will see many more of these devices - 2013 Year of Entrepreneur (or so they say)

Moneyman may I ask what excites you when it comes to investing?