Need Investment Advice

I've been trying to get my invention(s) made for over 20 years.


There's a guy who says that he'll invest $125,000 for half the company, but I can pay that back in 7 days when the company is up and running, but he says "it's a GREAT deal, what, are you going to keep looking for another 15 years for an investor?".... Meanwhile, I asked him to lend me $120 and he can't do it. I know him for 2.5 or 3.5 (can't remember how long ago we met) years now.


He has an MBA and best advice is "we need capital, and I know some people with money, we should get a third each of the company for the person to join".


You see, he has money, but it's all tied up in his possessions.... property, that is. So, he would have to risk his house to borrow funds to "make the business happen".

We've been talking about this for years. But I guess he really needs to do something now as he is running out of money. He knows people that they could easily afford to lose that amount of money. Is a "go between for funding" worth 1 third of a company?

I basically asked him yesterday "so, you want to lose part of your share of the company to someone that'll loan you $125,000 for 7 days?"

In other words I pressed him on if he HAD TO, could he come up with the money himself, if when he knew what the idea was and realized that it IS a "sure thing" would he be able to self finance it.

He said yes he could.

Only took me 3 years to get him to finally say that.


So, should I go into the deal? A fifty-fifty split in a company that will recover ALL start-up costs ($125,000) in 120 days*, AND be able to repay the the loaned amount in 7 days at that point. In other words.... the revenue from day 120 to 126 could be removed from the bank account and pay back the borrowed $125,000 with NO effect of day-to-day operations of the company hence forth.



* Could be in as little as 80 days.

you ask something related money in an amigans forum?? you fool...

@Atheist
I don't know about Canada, but in the UK there are some organisation(s) were inventors can get (I think free) advice on how to realise their inventions.

I would explore all your options, before deciding to risk it with this guy. Most likely there are better alternatives. At the very least getting better advice might allow you to negotiate better with him.

I'd choose carefully my business partners before any venture, let alone accept to Partner with someone suggested by a person not well known either.
Being a 3 number venture puts yourself into a non deciding minority, they could change company politics at any time.

Quote:
Hi ChrisH,

I've never had any other offers.

Also, there is practically, for all intents and purposes, NOTHING available.

There is a club here, that has no telephone number and does not reply to emails, and hasn't had a new meeting date posted for 6 months now. I went to it about 5 years ago, and everyone was asking everyone else how to get financing for themselves.

I tried to get on Dragon's Den but they said because it isn't patentable, they're not interested. Although I saw a guy on one episode who couldn't get a patent for his thing. It was a screw head design of a Phillips and Robertson combined into one.

Quote:

2/3 to 1/3. Yeah. That's a real "deal killer". Thanks.

They could do anything thru to selling off the IP for near zero value.

@Athiest Quote:
You probably haven't been approaching the right people/organisations in the right way. (I don't really have a clue what the right people or way is, but I am sure it must be possible to find out. Even if you have to pay someone (experienced in this area) for advice... but I wouldn't pay someone to sell you idea on your behalf.)

I mean, you effectively want to create a startup company. I have heard a lot of good things about "Y Combinator" as a way of finding investors, but I do not know how much advice they actually give (or what their terms are). At least I trust the reputation of one of the people who founded Y Combinator.

@Atheist

I would be very careful about this.

You sound very confident that you can get your money back, but it's never a certainty.

A good rule of thumb: Don't risk the money unless you're willing and able to lose it ALL. There's no sure return on anything, especially if your idea isn't patentable, as if anyone else cottons on to your idea, you can rest assured they'll have much deeper pockets with which to invest, giving them much larger economies of scale, as well as much better marketing budgets.

I would never ever ever borrow money to finance a project which wasn't patentable.

@atheist

Maybe not completely relevant, but perhaps an avenue to look down if your looking for private investment in an idea is something I stumbled across online recently in the last couple of weeks. Because the banks are said to be 'no longer lending™' - new initiatives are starting to take off here in the UK - and possibly elsewhere. (?)

Google - 'peer to peer lending' and look at sites such as fundingcircle.com. Perhaps similiar schemes exist for you closer to home.

My first advice to you is NEVER sell someone else equal or greater interest than yourself. At 50%, you may have legal problems making any decisions without your partner's agreement. In this case, you want to own a minimum of 55%. Some "investors" only have the intention of putting forth money as a way to take everything you have in the end.

Also,

If I were the investor, I would not finance a non-existent product. I would only invest to expand an existing product or business.

And, if I were the one looking for an investor, I would not deal with anyone who does not already have the money ready. (liquid financial account)

What might happen.

You borrow the money. The partners don't steal it but actually fund you getting it to market. They get their money back and you make a little profit.
BUT WITHOUT A PATENT, YOU DO NOT OWN THE IDEA.

Your investors who have more money than you dissolve the partnership, undercut you and take your IP and market it themselves, leaving you high and dry.

OR MORE LIKELY

Your investors just take your money and idea.

Most big banks have a small business support service. Have you spoken to them? Have you things such as Independent Financial Advisors?

It is better to invest a few hundred dollars for good advice than to fall for the smooth talk of a desperate snake oil salesman.

To quote Monty Python: Run away! Run Away!
www.youtube.com/watch?v=KAp9sFVdERQ

Thanks for the advice all.

I think that I'll go with logicalheart's talking to bankers.

I don't have money or assets, but when I show them the financial projections, they themselves may get interested.

Hi ChrisH,

Y Combinator is more interested in technology things, and they seem to be of the belief that $11,000 is enough to launch a company.

I found out that the machine I need costs $45,000. Then I need a place for it to operate for at least 5 months. Need a second process machine that's at least $4,000 too. I was only able to find ONE company in the US that sells it. I could get it overseas, but I'm not sure if I'd get it as no one's telephone number is available, and they probably don't speak English either.

> no one's telephone number is available, and they probably don't speak English either.

Maybe someone in the community can help. If it's in France, I can call them for you (for free )

Hi Elwood,

Well it's possible,... is there anyone in China?

Now, someone need to ask how to build a house, what car to choice, what kind of color is best one :) And, what is funny, that some ppls will start their answer :) Sometime i feel a needs to open moobunny, just to be sure that there is still some rationality left. Who will in interest to come to all that amiga stuff, when such kind of topics accepted and having acide they didn't locked, but you all continue to answer to that #OOPS# !

Hi kas1e,


Not quite sure here, but are you saying "what does this have to do with Amiga?"


If that's the question, the answer is "everything".

Hi kas1e,

I can't understand your original comment.


edit; okay, I think I know what you're saying.... You do know the forum title is "Free for all", right?

Well, I haven't heard from him since our last telephone call.

I was talking about making $10,000 a day in profit, and he was saying "you need to raise money yourself, try working at a movie theatre at $11 an hour." Is THAT what an MBA gets you for your ability to give financial advice?

He all like "we spoke on the phone for 10 hours and I'm not billing you for all the advice I'm giving.....". Yeah, we spoke for 10 hours that day (yes, it was 10 hours). He claims that I was wasting his time when in actual fact, HE was wasting HIS time!