Author Topic: Do you invest in startups, angel investing, or other higher risk/ higher yield i  (Read 4315 times)

frugaldrummer

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My boyfriend is in sales, he does capital campaigns for companies that need investors.  He's been out of the business for a while and is just getting back into it. He actually has some really solid investment opportunities available (one is a medical device company, FDA approved, brilliant idea, nothing like it on the market, every hospital will start using these disposable items in the operating room eventually because it improves patient care AND cuts down on OR time; one is a limousine manufacturer who survived the downturn while his competition went under, but now he's flooded with orders and needs capital to ramp up production).

The problem he's having is just getting connected back into the kinds of investors who like these types of investments.  My social circle consists of people who either don't have money, or are very very conservative/cautious investors.  I know there are people out there who like these higher risk/higher return types of investments.  If you're one, I'd welcome any suggestions as to how to help him connect back into those circles. 

kyleaaa

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I have nothing to add except that most inventions that cut costs and improves performance, etc end up failing. Having a great product never enough. USUALLY if somebody can't get money from a bank or angel investor (the limo guy should be able to get funding from both, for example), there's a good reason.

dragoncar

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I doubt anyone here has the bankroll for that.  To properly spread the risk (at minimum investment levels times X startups) you'd need quite a few million I think.

Unless you are a serious risk taker in which case I say start your own business and invest in yourselfZ

more4less

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Crazy idea - we all chip in few grand and start our own PE firm. :)
« Last Edit: August 29, 2013, 04:07:52 PM by more4less »

tomsang

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I have invested and continue to search for good businesses to invest in.  As was mentioned a good idea, doesn't mean a good investment.  Shoot me a PM if you want to forward me some information on the opportunities.

I like the idea of a Mustachian PE firm.

Tom

P.S. I would not provide more information on the board about the opportunities as it may be seen as soliciting investors, which puts you into a new arena of fun.

frugaldrummer

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Well, being a rather conservative investor myself, I tend to agree with you.  However, both of these companies seem to be on track and have somewhat legitimate reasons why they are scrambling for funding right now.  The types of investors my boyfriend has worked with in the past were angel-investor types, the sort who would see the value in these companies and be willing to take some risks for the greater rewards.  He's just been out of the business for a while (had his own, different  business for a few years with an ex-girlfriend which ended badly with her basically stealing all the money) and needs to rebuild his connections.

frugaldrummer

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And re: last comment Tom, no I'm not soliciting investors but more looking for ideas where such investors would hang out?  And how those contacts are usually made?  This is really not at all my field.

tomsang

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And re: last comment Tom, no I'm not soliciting investors but more looking for ideas where such investors would hang out?   And how those contacts are usually made?  This is really not at all my field.

Depending on where you are located there tends to be various organizations that put potential businesses in contact with qualified investors.

If you are in the Seattle area, one that I have attended a few time as an investor/consultant is:http://www.keiretsuforum.com/global-chapters/seattle/  When the companies pitch their ideas, it is a lot like the Shark Tank without the buzzers.  You have a lot of desperate people who have put 100's or 1,000's of hours into an idea that are torn apart by savvy investors who ask pointed questions. Some shine and others die on the vine.  Once the group leaves, then the Keiretsu asks if there are people interested in investing.  If you are interested, then you start talking directly with the organization to conduct your due diligence and negotiate the terms.

Lots of fun.  I need to start going again. 


tomsang

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Here is a list of the cities that they hold meetings. 

http://www.keiretsuforum.com/entrepreneurs/investment-criteria/
Barcelona, Beijing, Boise, East Bay, Istanbul, Kirkland-Eastside, London, Los Angeles, Madrid, New York, North Bay, Orange County, Paris, Philadelphia, Pittsburgh, Portland, San Diego, San Francisco, Seattle, Shanghai, Silicon Valley, Spokane-Inland, Tel Aviv, Toronto, Vancouver, Washington D.C., Westlake Village

Nords

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My boyfriend is in sales, he does capital campaigns for companies that need investors.  He's been out of the business for a while and is just getting back into it. He actually has some really solid investment opportunities available (one is a medical device company, FDA approved, brilliant idea, nothing like it on the market, every hospital will start using these disposable items in the operating room eventually because it improves patient care AND cuts down on OR time; one is a limousine manufacturer who survived the downturn while his competition went under, but now he's flooded with orders and needs capital to ramp up production).
The problem he's having is just getting connected back into the kinds of investors who like these types of investments.  My social circle consists of people who either don't have money, or are very very conservative/cautious investors.  I know there are people out there who like these higher risk/higher return types of investments.  If you're one, I'd welcome any suggestions as to how to help him connect back into those circles.
Your BF must have been out for a really really long time to have difficulty getting back into it.  Maybe a little due diligence would help.

The bar for being an accredited investor has been slowly eroded by inflation.  A high-income earner (or couple) or someone with a million bucks of capital is not as exclusive a club as it used to be.

For example, the Angel Capital Association has hundreds of chapters throughout America.  The chapters have screening committees and they'd like to have one or two startups to present at their monthly/quarterly meetings.  I've been a member of Hawaii Angels for over five years and we rarely engage with capital-campaign reps these days because it's easier to network online (through ACA's Gust.com) with other angel investors and startups.  The startups tend to be of higher quality, too, although Gust gets more than its fair share of spam pitches.  I can think of a half-dozen "fundraising guys" who have pitched their deals to the screening committee, but I can't remember even presenting any of them to the members.

Angellist (https://angel.co/ ) has greatly leveled the playing field between angels and startups.  In fact it may render the field of "capital campaigns" irrelevant.  TheFunded.com and Venture Hacks do a similar job of helping entrepreneurs find investors.

YCombinator and TechStars accelerators have further helped entrepreneurs educate themselves on startups and raising funds.  Your BF could connect with local programs to see how he could help or how he could contact their investor members.  Ideally he'd have something to contribute to the training or the mentoring before making his own pitch.

Frankly, if these startups are so good then they should be capable of obtaining funding without sales services.  Hawaii Angels sees about a dozen medical devices a year and selects maybe one or two for further due diligence.  That's on an island thousands of miles from Silicon Valley or Boston or Houston or any other hotbeds of medical-device development, so I suspect that good med tech startups are pretty common on the Mainland.  Maybe the due diligence will help them break out from the pack, but if they could break out of the pack then they wouldn't need someone to run a capital campaign for them.

Manufacturing is a different issue.  While the limos may be a great product, there's not necessarily a big payoff for an angel investor.  But again if the limos are so good then they'd hypothetically be able to tap into capital through more conventional methods.  The due diligence starts to splutter when you hear "Well, you see, they have some issues with traditional financing because..."  And if the limo company hasn't considered KickStarter then it needs to do some more due diligence of its own.

Entrepreneurs are rightfully cautious about using capital campaigns because they tend to connect startups to isolated angels who invest without benefit of the support structure of a group or an accelerator or an incubator.  Heck, these angels might only rely on your BF's due diligence for their decision.  They may be known as "dumb money" because they offer funds without any other skills or support or connections.  These are the types of investors who turn into problem investors when the company needs another funding round or has business problems.  Entrepreneurs would much rather tap into angel investors who are business execs or tech gurus or even cleantech activists.

Finally I'd suggest that your BF consult this Google Doc (https://docs.google.com/spreadsheet/ccc?key=0Aj1vUsSJW6-5dEFJelFrVFJnalhzUldLNEdnUDdHSnc#gid=0 ) of entrepreneur resources linked from this post:  http://the-military-guide.com/2013/07/25/entrepreneur-resources-for-veterans/   Surely something in there is in his local area, and the staff might be able to help him connect with the investors who are supporting those activities.

frugaldrummer

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Wow, thanks guys, that's a lot of very useful information.  :)

Yes, I can see how the internet has probably changed the field.  It's a field where he had a lot of success in the past, I think it remains to be seen if it will be a good place for him today.  (He was definitely anti-mustachian in his past, but I - and circumstances-have converted him a bit). 

The medical device area is a difficult one, but from a strictly medical point of view (MY area of expertise) it's a great product, and one that has the potential to reduce OR time (which is very expensive), thereby saving hospitals money.  However, I also know the difficulties in getting new products into hospitals.


Nords

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The medical device area is a difficult one, but from a strictly medical point of view (MY area of expertise) it's a great product, and one that has the potential to reduce OR time (which is very expensive), thereby saving hospitals money.  However, I also know the difficulties in getting new products into hospitals.
The founders need to get it on Angellist.  Then they'll find out how good it is.