homepage Welcome to WebmasterWorld Guest from 54.226.168.96
register, free tools, login, search, subscribe, help, library, announcements, recent posts, open posts,
Pubcon Platinum Sponsor
Home / Forums Index / WebmasterWorld / Professional Webmaster Business Issues
Forum Library, Charter, Moderators: LifeinAsia & httpwebwitch

Professional Webmaster Business Issues Forum

    
VCs, Angel Investors, Bank Loans.
all too risky....what would be the step below?
Rick42




msg:790027
 7:32 pm on Feb 7, 2006 (gmt 0)

Does anyone know of smaller organizations or groups that would consider investing in dotcom businesses, but not in the M$ range?

I have been looking into the whole VC deal recently, and I do not feel my website is in need of such a serious investor, and I do not even know if the size of my dotcom business will even be considered.

A simple 50k or 100k could potentially (and I am confident it will) place my business in a very ..very profitable and successful position.

Aside from the typical "bank loan" answer, anyone here know where I should be looking?

 

stajer




msg:790028
 8:45 pm on Feb 7, 2006 (gmt 0)

Friends and family. The majority of initial funding at that level usually comes from people you know. You can structure the deal either as equity or a loan. You will still need a good set of financials, a business plan, and a small "road" show, but you will need that for any serious investor.

andye




msg:790029
 10:27 am on Feb 8, 2006 (gmt 0)

Hi - I'm not clear why you consider angel investors and bank loans 'too risky', could you expand on that?

This seems like natural angel territory, so I'm not sure why you want to avoid them.

best, a.

Rick42




msg:790030
 4:42 pm on Feb 8, 2006 (gmt 0)


Hi - I'm not clear why you consider angel investors and bank loans 'too risky', could you expand on that?

This seems like natural angel territory, so I'm not sure why you want to avoid them.

Reason for that is simply because when you have VCs involved, they can tend to take over management and even own a piece of your business. ...unless I am mistake.

I was mainly talking about VCs...but Angels and banks also have high interest rates and asset ownership for liability insurance...

LifeinAsia




msg:790031
 4:52 pm on Feb 8, 2006 (gmt 0)

A simple 50k or 100k could potentially (and I am confident it will) place my business in a very ..very profitable and successful position.

In your definition of "successful position" are you factoring in the amount of profit that you have to funnel back to the investors? Remember that when you take on investors, it means you are taking on shareholders/owners, which is a whole set of responsibilities/hassles that most people don't think about until after the fact.

You have to have shareholder meetings, divide up the profits to pay dividends to the investors, etc. They will often (althought maybe not for such a small amount) want to get their hands in the business to ensure that they get a nice ROI. What they want to do to may not align with your wishes.

For the amount of money you're talking about, getting a loan from friends/family or a bank, taking out a second mortgage, or even racking up credit cards may be the better route in the long run. Remember- once you pay off the loan, it's over. Shareholders hang on forever (unless you buy them out, which is often more expensive than the interest you would have paid on a loan). Plus the interest that you pay is an expense to write-off on your taxes.

stevehbs




msg:790032
 1:28 am on Feb 9, 2006 (gmt 0)

Rick at that level of funding it might be beneficial to look into an SBA low doc loan (if you are in the US) S.C.O.R.E. which is run by the SBA can tell you if the business model will be considered.

VC are sharks and 99.9% of the groups I know will not consider a investment that small. The due dill. cost and other paperwork will cost a large portion of what you are looking for as an investment.

The best bet is to grunt it out at a job and build the site till you can bail and work on it full time.
Partners can wind up to be a huge headache and destroy the biz. You can do it but imho you need to bootstrap it.
Best of luck,
Steve

andye




msg:790033
 11:39 am on Feb 9, 2006 (gmt 0)

because when you have VCs involved, they can tend to take over management and even own a piece of your business.

(snip)

but Angels and banks also have high interest rates and asset ownership

Hi again,

The way it works is this:

VCs or Angel investors buy equity in your business (they buy a share in the business) with the money they 'give' you. As someone else has pointed out in this thread, VCs are unlikely to be interested in an investment this small - so realisticaly we're talking about equity investment by angels or friends / family.

In either case, you'd be selling them a percentage stake in the business - they'd become part-owners.

(Unless your family would actually *give* you money, in which case we're talking about a gift rather than an investment).

When someone buys a share in your business, they get:
- a say in how it's run
- a proportion of the money if you sell it
- a proportion of the money if you pay out dividends

A loan, on the other hand, has regular interest payments, but the lendor doesn't take ownership of any of the equity.

The key difference:

- With a loan, you know in advance how much you're giong to have to pay each month, and if you default (don't pay it back) then the lendor comes and takes away whatever it is you put up as security for the loan (just like the bank having a mortgage on someone's house).

- Whereas with equity investment, if things go badly then you don't have to pay out any money at all. If things go well on the other hand, the deal will usually be structured so that the investor gets more money than they would have got if they'd given you a loan. This is their reward for the extra risk they run.

You're unlikely to be able to get a bank loan unless:
- the business has assets you can use as security,
or
- you're prepared to use some of your personal assets as security (personally I see this as a Bad Idea)
or
- you use a scheme where the government provides security to the bank for your loan, such as the Small Firms Loans Guarantee Scheme here in the UK.

A few useful books:
High Tech Start Up by John L. Nesheim
The New Business Road Test by John Mullins
The Venture Capital Handbook: Strategies for Successful Private Equity Investment by William D. Bygrave, Michael Hay, Jos B. Peeters
Smarter Ventures by Katharine Campbell

(some of these are now a bit out of date, so if anyone has more recent recommendations, I'd love to hear them).

hth, a.

Rick42




msg:790034
 6:29 pm on Feb 9, 2006 (gmt 0)

thanks for the posts guys/gals. I will keep all the advice noted and post back results if I ever seek any of the options out.

digitalbrain




msg:790035
 8:11 pm on Feb 26, 2006 (gmt 0)

Out of all the options,

If you want a quick and early funds you can go for the bank loans , Since your business is profitable you need not worry for the repayment.

If you want to have a risk free funds you can get a vc , if the business falls , vc also is equally resonsible and his investments gets eroded in the same proportion .

I suggest that initially you distribute some of your holdings among relatives and friends ,say around 5-10% of the holdings of the company.

Once the funds are there in the company , Any project which is break-even will show profits as there will be no cash crunch for handling asset growth rate.

Then eventually you can raise funds from the vc and angels

Global Options:
 top home search open messages active posts  
 

Home / Forums Index / WebmasterWorld / Professional Webmaster Business Issues
rss feed

All trademarks and copyrights held by respective owners. Member comments are owned by the poster.
Terms of Service ¦ Privacy Policy ¦ Report Problem ¦ About
© Webmaster World 1996-2014 all rights reserved