Author Topic: GrowthFountain  (Read 1782 times)

alexpkeaton

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GrowthFountain
« on: November 05, 2017, 03:49:23 PM »
Anyone heard of it or have any experience with it? A fast-casual restaurant with a few locations that I like started a campaign to raise money for a new location and they sent me some spam. I see a $25 sign-up bonus and a $100 minimum, so it could be a quick way to invest $100 for only $75 for an instant 33% return, plus whatever the actual investment returns. But the whole idea of crowdfunding seems kind of dumb to me. How legit is this? How can I quantify the risk? I might just throw in for the bonus and that's it, but I'm just curious if anyone else has used it.

secondcor521

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Re: GrowthFountain
« Reply #1 on: November 05, 2017, 04:03:54 PM »
It sounds to me like the company could be violating SEC law - I didn't think one could sell securities to the public without being a registered stock broker and without the stock trading on an exchange.  But maybe there is some loophole they know about.  Personally I wouldn't bother investing with them.

alexpkeaton

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Re: GrowthFountain
« Reply #2 on: November 06, 2017, 08:56:16 AM »
The securities do appear to be registered with the SEC.

Crowdfunding seems like more of a marketing idea and a way for companies to raise capital more cheaply than serious investors or banks might provide. For that reason I'm skeptical that it's actually a good investment. But, again, for a trivial amount of money I might kick the tires and get the bonus offer.

alexpkeaton

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Re: GrowthFountain
« Reply #3 on: November 06, 2017, 11:56:43 AM »
So I nerded out while bored at work and made a spreadsheet. In the optimistic scenario, you invest $75 and get paid back $200 within 3 years. It works out to a nearly 50% annualized return. In the worst case scenario, you invest $75 and get paid back $200 within 20 years. That works out roughly to a 2.5% annualized return.

There are two major variables in play: How much revenue the company generates, and how much gets invested. 5% of revenue goes into the payment pool annually, but the more invested the smaller each investor's share. So an investor should hope the company only meets their minimum funding goal and get nothing more.

With such a wild variance I can't see putting anything other than play money into this. As I said, I might kick in $75 to get my $25 bonus and just see what happens, but there's no way I'd put any serious money into this.
« Last Edit: November 06, 2017, 11:58:49 AM by alexpkeaton »

secondcor521

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Re: GrowthFountain
« Reply #4 on: November 06, 2017, 01:46:39 PM »
I disagree.  The worst case is that you invest $75 and get back zero.  After a few phone calls and reading the IRS web site, you may get to deduct a capital loss of $75 on your taxes and thus recoup maybe $25 in tax savings, for a net loss of $50 and time and hassle.

alexpkeaton

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Re: GrowthFountain
« Reply #5 on: November 06, 2017, 02:29:58 PM »
I disagree.  The worst case is that you invest $75 and get back zero.  After a few phone calls and reading the IRS web site, you may get to deduct a capital loss of $75 on your taxes and thus recoup maybe $25 in tax savings, for a net loss of $50 and time and hassle.

Yes, that is technically the worst case scenario. I should have said the pessimistic scenario. It's unlikely they'll go out of business. My assumption in this case was that revenue was half of their projection and that they maxed out the investment pool and diluted my hypothetical $100 investment.

Gondolin

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Re: GrowthFountain
« Reply #6 on: November 08, 2017, 07:05:29 AM »
Quote
It's unlikely they'll go out of business.

What makes you think this? Food service is a vicious industry and there's a glut of "fast casual" chains. Just the fact they they're crowd sourcing funding seems like an admission of financial weakness.

alexpkeaton

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Re: GrowthFountain
« Reply #7 on: November 08, 2017, 08:23:36 AM »
What makes you think this? Food service is a vicious industry and there's a glut of "fast casual" chains. Just the fact they they're crowd sourcing funding seems like an admission of financial weakness.

Yes, it's possible, but they've got 4 locations that have been open a few years and have lines out the door at lunch. I think they've a) proven the model works and b) proven they can run a business. I'd be much more concerned if they were new restauranteurs. (FWIW, I think a restaurant's chances of success depend much more on the owner's ability to run a business than the quality of the food.)