Getting Venture capital / angel investment

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Tilluin

Molten Core Raider
135
118
Does anyone have any experience gaining VC / angel investment for a start up?

I've got a well researched and planned out business idea in the leisure industry which is mostly ready to go, only a bit of R&D on specific things which would need to be built, and I'm looking at this market for achieving investment. I was originally going down the bank loan route but we got 5% from opening up and someone gazumped us on the property we needed so we lost a lot of our personal investment in the lost legal fees, planning applications etc and we now don't meet the banks required match funding method.

There seems to be a lot of websites out there that claim to connect you with investors, I'm in the U.K. By the way, but I'm wondering if there's any more 'legit' ones? Also if it's achievable to seek investment now that the only seed money I have is already in use (it went on the previous attempt and on the logo, branding etc that we still have to move forward with). Ideally I'm looking for funding of £150-200k to open the company and all I'd need the investor for is their money and possibly some mentoring as the business grows so it wouldn't be a heavy involvement for them. I sadly don't have any family / friends with money to tap into.

Anyone with some experience / knowledge in this area?
 

Shonuff

Mr. Poopybutthole
5,538
790
One of my Professors ran a VC fund while teaching at the same time. Keep in mind, they look for hi tech investments (VC's favor innovation). Without knowing more about what you plan to do, it's hard to say. He did give us a criteria for what he was looking for. Namely, other than being hi tech, he looked for investments where any one of them could pay off their entire portfolio of investments. Honestly, if you can go the bank route, you'd probably have more say so over your company. Many times, the VC's look for a way to get the founder out ASAP so they can control it themselves.

Given the amount you are asking for, you need to be talking to a bank instead. A VC's idea of mentoring is replacing people that feel as if they need mentoring. You get your money, and someone else does your job (better).
 

Rikkon

Lord Nagafen Raider
97
98
Angel investors are just accredited investors as defined by their income / assets. The defining $ isn't necessarily high.

If you want to have someone "connect" you for a fee it is probably better just to pay someone to raise the money for you. It's usually ~2% fee of capital

They will typically just hit up a few family offices depending on the amount you need.

If it's less than a million and for a start up you're going to get charged out the ass - probably 20% preferred + warrants -FYI

I've never dealt with it but I'd run down an sba loan to the very bitter end before I'd get involved with the type of investor that isn't friends / family that will lend under a million as a start up. These folks are generally running a loan to own model

Anyhow another avenue is putting together a 504 ppm (as opposed to a 506 for accredited only) and getting an attorney to opine on it cheaply so you can do a friends and family round.

A 504 is more onourus than the 506 you need to pitch to accredited investors but for what it sounds like you're looking for it makes more sense. Depending on the industry you can probably get away with 8% preferred or 10% debentures via a 504

Sorry I rambled
 

Tilluin

Molten Core Raider
135
118
The idea I'm looking for investment in is essentially a new type of gym (not cross fit) for the area I live in. Ive heavily researched / worked many models out, including case studies, and it's an attractive proposition but not on the level of a tech start up. Sadly the bank option is no longer there as we don't meet their match funding criteria (say we wanted 50k from them we'd need 50k in the bank).

In the U.K. there are tax incentives for angel investors so there seems to be a model where lots invest their money to avoid tax and they install a buy out clause at year 5 so I, the business owner, am forced to buy them out at that stage. The rule appears to be they can't take more than 30%. At this stage it's looking like the only realistic option for funding but it feels like a bit of a mine field.
 

Shonuff

Mr. Poopybutthole
5,538
790
I've never dealt with it but I'd run down an sba loan to the very bitter end before I'd get involved with the type of investor that isn't friends / family that will lend under a million as a start up. These folks are generally running a loan to own model

Yup. If you are talking to this sort of person, they fully expect to buy you out and own it themselves eventually. With the Professor in question, he was asked by one of the students why this was so. He just said that was the nature of the beast. 98% of the time he believed that founders could not grow the business past a certain point. Once you get to a certain level, it's time for a new management team.
 

Shonuff

Mr. Poopybutthole
5,538
790
The idea I'm looking for investment in is essentially a new type of gym (not cross fit) for the area I live in. Ive heavily researched / worked many models out, including case studies, and it's an attractive proposition but not on the level of a tech start up. Sadly the bank option is no longer there as we don't meet their match funding criteria (say we wanted 50k from them we'd need 50k in the bank).

In the U.K. there are tax incentives for angel investors so there seems to be a model where lots invest their money to avoid tax and they install a buy out clause at year 5 so I, the business owner, am forced to buy them out at that stage. The rule appears to be they can't take more than 30%. At this stage it's looking like the only realistic option for funding but it feels like a bit of a mine field.

In the US, you'd have a hard time getting a VC to even meet with you on a gym idea. I looked at going into the gym business (it's in my thread). What I found was that the gym business is not very recession proof. When times get tough, most people will cancel their gym membership in a heartbeat. They can go running in the park, do pushups and situps at home, as well as biceps curls. I remember when I looked, gyms were one of the worst performing businesses in terms of profits.
 

Borzak

Bronze Baron of the Realm
24,422
31,638
I don't know if it counts as an angel investor, but a guy I did lot of work for wound up giving me controlling interest of the company because he felt I could keep the company afloat and make more money than his son. But trying to talk a stranger into giving you funds for a business, wouldn't have a clue.
 

Big_w_powah

Trakanon Raider
1,887
750
I'd love to strike out on my own; I just have zero confidence I could build enough income fast enough to keep me off welfare before my savings ran out..I mean, I put in 70-80 hour weeks as is...Why not get to enjoy all the monies?

But fuck..