Tuesday, November 25, 2008

Investing for the masses (recession beater)!


Over the last five years or so I have "risen" from the level where you started a business with your own money and made sure that it financed itself to a level whereby most of my current ventures have been at least partly funded by outside investors. Anyone with a passing knowledge of this business knows what it entails: you come up with an idea, do your research, write your business-plan, develop your product/service and then you do the big song & dance with either a private investor or a VC (a good insight can be found here). Banks will generally not come into the picture if you're a start-up. The result of all this is hopefully a sizable investment that will allow you to expand your team, bring your product to completion stage and to go out and sell it resulting in revenue.
One of the side-effects is also that smaller investors generally don't get a look-in (unless at seed/angel stage). Funding seems to have moved to larger amounts, even in first round funding, resulting in a declining angel investor culture.
The angel/seed investor culture in Ireland is almost non-existent due to a lack of interest and opportunities.
It also means that smaller investors are left with no other opportunities than to invest their cash via the institutionalised route (funds etc.) or to set up an account with a broker and invest in mostly established companies. No real "exciting" opportunities.
This has got me thinking; I think that it's time to change this situation.
I have two ventures starting up in the next few weeks, they're relatively small start-ups with good potential. Both are technology based; one is a security service and the other operates in the communications sector. Both however require a start-up investment.
It would be great if a culture existed through which I could open this opportunity to anybody who is interested in investing. It wouldn't be targeted at high net worth individuals but at people with some "spare" cash who would like to invest in the right early stage company and profit from the potentially high margins (mind that your investment could also crash & burn). There would be a minimum investment of something like a 1000 euro. In exchange the investor would get equity in the company. They would also get the option to purchase shares at preferential rates in any future offerings. Personally I would prefer to raise my funding through a number of smaller investors rather than one large investor. As a rule of thumb larger investors are using other peoples money (pensionfunds most likely) and will play a different game than private inventors. They will generally look for a quicker exit and want more involvement. From an entrepreneurs viewpoint private investors are easier to deal with.
I am going to spend some time thinking about this "concept" over the next few weeks in order to establish it's feasibility.
Comments & suggestions are very welcome!

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