Fund raising question

Quote: Wizard

Thanks for the comments thus far. Do any of you know when someone takes a business idea to venture capitalists, and they like it, what is the usual compensation arrangement to the venture capitalists?

Loads of people beat me to the best comments here, what I get for visiting a college buddy and sitting in his new pool and hot tub. But still much to be said.

As was brought up before, watch "Shark Tank." This show really is an intro course to how VC works. Some of their ideas are home runs, some are flops. That toy rental thing was a total loss, the woman never paid UPS the shipping. So for this loss something else must be a 100% gain just to break even. In gambling terms it is high variance.

Any money you put to this, should come out of your gaming budget. IOW, if you were going to drop $10K on NFL bets this year and you give this person $5K then you bet $5K on NFL. I would say "end of story" but it is not. If you invest and there is not success I promise you they will come back for more. If you bet the Steelers and they do not cover the book at Caesers doesn't call you up asking for more cash, but if you invest and someone needs more cash to keep it going they will call you up, until you are bled dry.

For a fictional example go to Netflix and watch Michael Scott and the WUPHF thing again.

Do not take offense at the following, it is meant as advice for a friend:

STRAIGHT TALK BEGIN
You have publicly came into a large amount of money. You are also a generous person. This makes you a "mark." The same thing happens to lottery winners and major league sports players. The person who sees you as a target may not have the intentions of a thief. But they see that you may be able to help them. So they say "why not give Mike a call?" If you help once, human nature dictates that the same person will probably call back if things do not go as planned. Then word gets out. Bernie Kosar's dad beld him dry. He is broke. Most athletes are broke just a few years after they retire. Ask yourself if this is money you can lose. WoV took 15 or so years to get the payoff it did and to do so it defied a lot of odds (no pun.) Is it worth it?
STRAIGHT TALK END.


Now, if you think the person will succeed, try this puzzle:

Jim is a very nerdy guy who is not a people person. Jim hung out at the library in college and still loves to read. Is Jim more likely to be:

A. A librarian
B. A used car salesman



Finally, there may be better investments out there. If I had $200K I could pay you back $400K in seven years, backed by oil assets recorded at the county as a lien same as the bank has on a mortgages house. Any takers?

All this comes down to one fact. Be extremely
skeptical. Don't learn a lesson the hard way.
Don't be kicking yourself in a year for being
a chump. Perform the due diligence, do the
work, find out if this is a good place for your
money. Have the person you're dealing with
investigated by a pro. It's worth the couple
hundred bucks to save thousands.

Quote: Evenbob

All this comes down to one fact. Be extremely
skeptical. Don't learn a lesson the hard way.
Don't be kicking yourself in a year for being
a chump. Perform the due diligence, do the
work, find out if this is a good place for your
money. Have the person you're dealing with
investigated by a pro. It's worth the couple
hundred bucks to save thousands.

The simplest advice is do not invest in something you do not understand the business and/or the person cannot explain it to your understanding in less than a minute.

This is how the big guys do it.

https://en.wikipedia.org/wiki/Venture_capital

Quote: AZDuffman

The simplest advice is do not invest in something you do not understand the business and/or the person cannot explain it to your understanding in less than a minute.

More often than not, it's the person
you're investing in, not the business.
That's why Bernie Madoff was so
successful, he was an A-1 con man.
Didn't matter what he sold, people
would buy it.

That's what bothers me about this deal
Mike's looking at. There's a really good
salesperson selling it to him. That's not
usually a good sign. Stay away from
time share free dinners, those people
can sell could sell running shoes to old
people in wheel chairs.

Interesting blog from Mark Cuban regarding investing and the state of the market.

Link

Part 2

Quote: DRich

Interesting blog from Mark Cuban regarding investing and the state of the market.

Link

Part 2

I am constantly shocked by the number of people who ask me if I am going to develop an app as part of my business. Or if I want to join an app development team. It's a game of the long tail... most apps never make any money, and the cost to develop them is not as low as people think. It's all about the hits... if your app development house don't have a hit quickly, they'll be dead and gone.

If the Wiz's business offer is an App company, turn tail and run unless you are being offered a stellar return (and the term as I understand them are by no means stellar). You'll get a better return playing the penny slots. Let others develop apps, then use the hits.

There are exceptions, especially if the app supports an underlying business, and if you are an expert in that area, it may be worth it as you can add value as an investor and not just cash. But general app-development is great for developers, and for the supporting eco-system, but not sure it's great for your investment cash.

Quote: TheCesspit

There are exceptions, especially if the app supports an underlying business, and if you are an expert in that area, it may be worth it as you can add value as an investor and not just cash. But general app-development is great for developers, and for the supporting eco-system, but not sure it's great for your investment cash.

The key is probably business apps and custom ones at that. This current side gig uses a nice app, probably $10-20K to set it all up. SO good for one person but not a huge business. There are many businesses out there that need a small app for their needs, but reality is most people do not pay for apps. Too many free ones out there.

Quote: AZDuffman

The key is probably business apps and custom ones at that. This current side gig uses a nice app, probably $10-20K to set it all up. SO good for one person but not a huge business. There are many businesses out there that need a small app for their needs, but reality is most people do not pay for apps. Too many free ones out there.

There's a good market out there for add-ons and small subscriptions. It just has to be a killer app, not merely 'good'. It's all about the hits. Just like the music industry. I dunno the app you are talking about, but I'd suspect the overheads are more than you think... but the developer time maybe cheap. Apps are good as the marginal cost of each sale is small... so once you have a hit, scaling is easy(ish).

Quote: TheCesspit

There's a good market out there for add-ons and small subscriptions. It just has to be a killer app, not merely 'good'. It's all about the hits. Just like the music industry. I dunno the app you are talking about, but I'd suspect the overheads are more than you think... but the developer time maybe cheap. Apps are good as the marginal cost of each sale is small... so once you have a hit, scaling is easy(ish).

Our app is a "driver" app. When I make a delivery the brass can see it. Think instead of the bulky FedEx devices just use an android phone. Also shows all my deliveries.