Small-business/Startup investor connection website

[thomasnye25]

Hi, I have been researching in creating a website that connects small businesses with inventors and business help. I have noticed that there are a decent amount of these websites already in existence, but have high minimums to invest. Would start-ups be interested in investments ranging from 500-10,000 dollars with smaller shares in business, hopefully increasing amount of investments. Does anyone think this would be more attractive than similar small business investment websites?

[vangogh]

I'm sure small business would be interested in anything that could help them with money. I don't think it would be the same with investors. The reason for those minimums is that it's not really worth it for investors if the amount is so small. There's probably not going to be enough return for them to worth the risk. Now that I think about it, I don't think it makes sense to give up shares of your business for $10,000 either. That kind of money is better as a loan.

[turboguy]

I have mixed feelings on it. I could see it being successful. First off I agree with Vangogh that it isn't worth it for a beginning entrepreneur to give up equity and a loan would be better. But on the other hand I see a lot of people posting here who have a dream but no money and poor credit. People with no other option would probably rather give up some equity that watch their dream die. So, yes, I think there are a number of people who would give up some equity to get the cash to start or grow their business.

From an investor standpoint I see this as being extremely high risk. There are loads of people who dream of owning their own business but really don't have a good plan, don't have the knowledge of the industry and don't have business experience. A very high percentage of those who would come to your web site for a loan will fail. To get in on the big deals takes some serious money. I believe to be an angel investor requires a net worth of 1 million and a sustained income of over 250,000. There may be a number of people who don't have that kind of money but who would be willing to make a smaller investment in something that had potential. With Shark Tank being my favorite program I would probably find something like you are talking about interesting.

Of course if you started that web site and I invested I would probably be like Kevin O'leary from Shark tank, Yes, I will loan you 10 grand to start your diaper delivery business and I will only ask for 5% of gross receipts until I have about 50 grand back and I wan't 50% of the business.

[thomasnye25]

I have mixed feelings on it. I could see it being successful. First off I agree with Vangogh that it isn't worth it for a beginning entrepreneur to give up equity and a loan would be better. But on the other hand I see a lot of people posting here who have a dream but no money and poor credit. People with no other option would probably rather give up some equity that watch their dream die. So, yes, I think there are a number of people who would give up some equity to get the cash to start or grow their business.

From an investor standpoint I see this as being extremely high risk. There are loads of people who dream of owning their own business but really don't have a good plan, don't have the knowledge of the industry and don't have business experience. A very high percentage of those who would come to your web site for a loan will fail. To get in on the big deals takes some serious money. I believe to be an angel investor requires a net worth of 1 million and a sustained income of over 250,000. There may be a number of people who don't have that kind of money but who would be willing to make a smaller investment in something that had potential. With Shark Tank being my favorite program I would probably find something like you are talking about interesting.

Of course if you started that web site and I invested I would probably be like Kevin O'leary from Shark tank, Yes, I will loan you 10 grand to start your diaper delivery business and I will only ask for 5% of gross receipts until I have about 50 grand back and I wan't 50% of the business.

Would it be more attractive if there was a staff that found potential small businesses who need guidance and worked with them to create a better business plan and eventually connect them with investors or loans?

[turboguy]

Would it be more attractive if there was a staff that found potential small businesses who need guidance and worked with them to create a better business plan and eventually connect them with investors or loans?

I don't think it would work as a stand along web site. There are already organizations like SCORE that will do that. Perhaps as part of the web site it could be effective. I sort of like your original idea. VanGogh didn't think it would work. I found the idea interesting most because if it did exist as you described it originally I would find it something that would appeal to me personally. Perhaps some of it might be because my two favorite TV programs are Shark Tank which is about investing in businesses and The Profit which is about turning them around and making them profitable and successful. If it did exist I would really find it interesting to look for businesses to invest in that had a good idea and someone dedicated to making it work but little money. I would probably mostly look for businesses that would be within 500 miles or so and would invest and mentor them to a degree.

I actually did that once a long time ago. The secretary I had at the time kept saying ideas she had for businesses. One day she said one I liked and I said lets do it. I will put up the money, you do the work and we will be 50-50 partners. A few days later we were up and running. It was really fun but then she got into financial problems and I bought out her half and ran it myself for a few years then my main business was taking off and I shut that one down.

[thomasnye25]

Thank you for your help! Obviouslty the main problem small businesses have with giving up equity in their business is losing control of the company. Being an investor, would you consider instead, investing less in a company for less equity and investing in more companys. If this was the case a few investors couldnt take complete control of the firm from the founder (Their biggest fear). And of course investors would still be involved in business processes and guidance. I really am interested in this website/business idea, and am inclined to learn as much as possible about investor prefrences as well as small business owners.

[Harold Mansfield]

I really am interested in this website/business idea, and am inclined to learn as much as possible about investor prefrences as well as small business owners.

I would think the best way to learn how to structure this would be to do it. It's going to be a struggle trying to format this on the outside looking in from the position of someone who's looking at it as a way to make money. You need first hand knowledge of what the business goes through, and what the investor looks for, and how they operate.

For instance, I didn't just jump up one day and decide building websites was a good idea. I'd built my own, run them, failed, succeeded, saw the problems and issues and from that experience figured what services others needed which helped me formulate how to package and sell my services and to whom.

[turboguy]

As a typical or not so typical investor who might find a site like that interesting and might look at investing options what would appeal to me and what would not appeal to me would be putting up cash for a less than controlling interest in the business but enough of an interest to make it worthwhile. I would probably be less interested in lets say putting up cash where there were 8 other investors putting up an equal amount and we each got 5% of the business with the operator retaining 60%. What would not appeal to me about that is that I would have very little say and there would be 7 other guys, each with their own ideas and it would be a mess.

I guess my feelings are that I have a pretty good head for business and would want to have some input and give some guidance but not on a day to day basis. Others might have a totally different view on what they would find interesting.

[turboguy]

Harold had some good points in his post. In business you have to try things and be willing to learn from your mistakes. I have a manufacturing business and it took 3 different products until we hit the one that was a good match and successful for us. That may well be true with the businesses that look for help on your web site and may well be true in your efforts. If you do go ahead with this where you end up could be very different from where you start.

[vangogh]

I'll echo what's been said about trying things and a willingness to learn. It's ok to make mistakes along the way. We all do. You try, you fail, you try to figure out why you failed and how not to next time, and then you try again.

For example, I'm not sure your idea can work, but so what. If you think it can then you should try. Minimize your risk and much as you can and then give it a shot. Whether you succeed or fail do your best to understand why.

[Harold Mansfield]

Mistakes were how I learned at least 50% of what I knew. These days maybe it's 20%-30% because I'm better at preparation, I read more, I can follow critical and logical thinking and applications better, and I waste less time correcting mistakes and troubleshooting and more time fine tuning.

Seriously..."Let's see if this works" is the mother of invention and innovation. The more you learn, the more bulls eyes you hit along the way.
You have to roll your sleeves up and get in there. Next thing you know it's 5 years later and you're analyzing and solving problems in minutes. Not hours.

[billbenson]

I don't know if it's true or not, but I've heard that most millionaires have filed bankruptcy more than once.

[turboguy]

Some take advantage of that Bill. I can remember a conversation when I was around 22 with a guy who was a business owner. He told me he had gone bankrupt in business twice and one more bankruptcy and he could retire.

I also remember a conversation that was one of the most interesting of my life. I went to dinner with one of my customers who was a millionare (back in the days that was real money). Over dinner he shared his life story. I can't relate it exactly but at 17 he bought a dump truck. By the time he was 20 he had 40 trucks with drivers working in the coal fields and made a fortune. The market collapsed and he went bankrupt. Then he moved to Alaska and made a million starting a business serving the oil fields. Again he became a millionaire but grew too fast and became bankrupt. He then moved to PA and started to import Ford tractors from England. For whatever reason he could sell them for $ 4,000 less than dealers here and make a big profit. He again made a million. That too eventually dried up but he kept his money that time and retired to a beautiful lake front mansion which he gave me a tour of that night. Most people can't become a millionaire once and I wish I could share his life story better but it was ages ago that I heard it.

[billbenson]

I've mentioned this here before, but I have a friend that right out of engineering school his career path was inventing a product, building a business and selling it several years later for a few million. First one failed and he went to work for HP while developing another product. He had a couple of other failures in his early years but no bankruptcy's.

He tweaked his business model to looking at electronics products that used multiple circuit boards to do one function. Then he would make an IC out of it. He developed contacts in India for development. He developed marketing and VC contacts. Today he lives on an Island, He has a small plane to commute to the mainland. He still works. He'll do research casually for two years then build a company. He will sell it and repeat. During his research years he doesn't work very hard. He's also super intelligent but not a nerd or a dickhead. That doesn't hurt. He had advanced calculus in high school and got one one B in college. Everything else was an A. Drank a lot of beer in college as well. Well we all did.

It was cool because there were 4 of us in our little click in college.30 years plus ago. We all went on to do different things, but 30 plus years later we still are all best friends. And my best friend list is pretty short. My acquaintance list is long, But it takes quite a bit to get on my best friend list. Any one of them would drop everything and get on a plane if I had a serious problem.

[Harold Mansfield]

I don't know how true the bankruptcy stats are, but I've read a lot of from successful entrepreneurs that admit to having a few failures before seeing any success.

[billbenson]

I don't know how true the bankruptcy stats are, but I've read a lot of from successful entrepreneurs that admit to having a few failures before seeing any success.

I would think that people that don't work in industry before jumping with both feet have a very high failure rate.

I had an advantage in that I worked out of my house 3000 miles from my boss within several years of graduating from college. Ya, my boss called me every day and wanted fax reports. But I learned to work from home.Sounds good to a lot of people, but not everybody can do it.