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    6 Replies Latest reply on Apr 12, 2009 8:05 PM by phanio

    Investor %

    rrdc303 Newbie
      I apologize if this has been asked here before.

      We're a data center and wireless Internet services provider and we'll do a bit over 300k this year if we keep on our same path. We're seeking between 200-500k from an investor. I first wrote our business plan towards an SBA loan but after being told we don't have enough sustained revenue, (broke even Oct 2008, in business since June 2006) I'm seeking an investor.

      The main problem I have is how much to give up in return for an investment. I know the answer which is "it depends upon a lot of things,etc.."

      With a proper investment, we could go from 2k in additional revenue per month to 5-6k. The money will be used to not only improve our infrastructure, but to advance the building of 4-5 wireless POPs in town.

      At this time, we are making about 2k a month in profit after small salaries and we pay all of our bills on time. We can continue this pace and still be successful so if we don't get an investment, it won't shut us down.

      So, any ideas? 5% for 200k , 10% for 500k ??

      Thanks for any help,
      Eric
        • Re: Investor %
          phanio Pioneer
          Most investors seek 30% or more in returns. Accredited investors like to see things like 5 in 5 or 7 in 7 - meaning 5 times their investment in 5 years or 7 times their investment in 7 years.

          Might want to try SBICs (Small Business Investment Companies). Search the SBA site for a listing in your area. These groups usually provide convertable loans.

          Business Money Today
          • Re: Investor %
            LUCKIEST Guide
            Investor %, Welcome Eric

            You state "the main problem is how much to give up for an investment".

            Do you have an Accountant, A Lawyer?? They should be able to give you good guide lines.

            How long have you been in business??

            Can I read your business plan?? LUCKIEST
            • Re: Investor %
              rrdc303 Newbie
              Thanks for the replies. I would love feedback on the business plan I've written. There isn't really anything that requires a NDA so if some of you had some time to review it and provide some feedback, that would be great.
              Just email me at: natter5@yahoo.com

              Thanks.
                • Re: Investor %
                  rrdc303 Newbie
                  I guess here is where I get confused.

                  If an investor gives us 150k and we "give" them 5% of the company. What type of payback is there? Meaning, we could own the business for 40 years and they die and they still own 5%.

                  This is the part where I get confused. Do they want some sort of payback in 5 years and at what price?
                    • Re: Investor %
                      LUCKIEST Guide
                      Investor %, Confused, talk to your lawyer
                      • Re: Investor %
                        phanio Pioneer
                        Most investors will require some sort of exit strategy - i.e. IPO, M&A, another investor buying them out or a management buyout. They usually will ask for a seat on your Board to ensure that the business is being run in their best interest (and yours). But, they will expect some sort of exit in 3, 5, or 7 years - depending on the investor and their time frame. Angel investors may go longer terms. Most investors will ask for a portion of your company that will give them the return they seek - usually 30% annualized. This is based on the price they think they will get when the exit happens (either IPO price, the acquiring companies stock price or purchase price, the valuation from antoher later round investor, or from the buyout).

                        If this is not what you expect or want - you might consider a loan - some investors will provide you funds in the form of a loan - but may require a higher percentage interest than 5% - more like 15% to 20% - with you making either monthly or quarterly payments.

                        If you can, swing a business loan - you might be able to get a lower interest rate - say under 12% (15% APR after fees) - with the same terms like monthly or quarterly payments.

                        Last option - find a partner that will work in the business with you for a portion of the profits.

                        Business Money Today