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Old September 22, 2021, 11:08 PM
Dien Rice Dien Rice is online now
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Join Date: Aug 2006
Posts: 3,020
Default I think the high failure rate makes it complicated...

Quote:
Originally Posted by GordonJ View Post
How about helping other bootstrappers with a little seed money.

Say, a bootstrapper could get 5k simply by having a plan, and the investor would have a stake in the start-up. Sure, it is done every day at upper levels, with millions on the table, but who or where is giving the little guy, the bootstrapper a little help to at least test the concept?

I still haven't found anyone or anyplace. Imagine a group of SowPubbers who each chipped in a little to fund some ideas? Or, maybe, we could do it ourselves?

Just tossing it out there, and to the group, do you think 5 thousand bux would be enough to help a bootstrapper at least test the concept?
Hi Gordon,

The way the venture capitalists and angel investors usually do it is as a kind of "calculated gamble"...

They figure that most of the businesses they invest in will fail. However, the profits from the few that make it, will make it so big, that it will more than make up for the losses!

According to this article from the Wall Street Journal, about three-quarters of venture-backed businesses fail to return the money invested in them...

The Venture Capital Secret: 3 Out of 4 Start-Ups Fail
https://archive.is/kFRAx

And that's after all the huge amount of due diligence that venture capital companies do! They only invest in the cream of the crop!

So... you'd have to accept that the money you invest in most businesses will disappear in a puff of smoke...

I think that's why you don't see more of it happening...

I did find one entity - a non-profit - which will do small, low-interest loans to businesses in the USA, even those with a low credit rating...

It's Accion...

They'll loan $5,000 to $100,000, at rates as low as 5.99% interest, but...

You have to have been in business for 12 months, making at least $50,000 a year in revenue...

Accion: Small Business Loans in the U.S.
https://www.accion.org/how-we-work/p...ans-in-the-u-s

So you really have to be in business already...

One of my brothers is an angel investor, and I've done some of this kind of investing myself (though not as much as him)...

He's made money on his investments. It works just like with venture capital... Most of his investments will lose money, but of the few that make money, one or two will make so much return for him, that it will more than make up for all the losses...

I think it's hard to do because of the high failure rate!

I think it often does come down to what Glenn was talking about... People often spend money to avoid having to think... So all that money they have quickly flies out the window...

I do know that many of these kind of investors invest in two important things - both the people behind it, and the idea behind the business...

Not one or the other, but both... You have to be impressed with both...

(You often see that on Shark Tank!)

Dien
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Last edited by Dien Rice : September 23, 2021 at 01:39 AM.
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