This from 1998, and 7 Steps to Freedom II by Ben Suarez,
only 1 in 7 tested offers are winners, and you could go 13 before you hit the two. And like the venture capitalists vetted the cream, his offers were written and designed by professionals, and still, only 1 in 7 and I understand those numbers have held up the last 23 years too.
Which sort of matches businesses started and those closed and if one includes all the Network, MLM, and distributor types, it may be closer to 1 in 100.
My opinion, even reading PLANS for the big multi-million dollar investments is, sure, they (the investor) may like the product and the person...but as we see on the shark tank types, SELDOM is there a vetted marketing program, and the EGOS alone on that show, they think that is what they bring.
But at the lower level, like down here, where I'm talking I think it would be the only thing I would look at, or the FIRST THING, as well as the idea and person.
Some people, no matter how good his idea, is just NEVER going to make it happen.
So, before I invested, I want to know HOW WILL YOU BE SELLING YOUR _______
WHATEVER? To whom, where, when and how?
I've dealt with scores of inventors, and very few of them give any attention to the marketing, and when I did (or the team behind my decision), and told them we would PASS on it, they got offended, because they just knew they had the greatest thing that EVERYONE would want.
Now as a corollary, in the employment arena, companies like PSI and MHS and dozen of others offer testing and evaluations. Likewise, a small investor group which not only offers moolah, but TRAINING and EDUCATION to those applying might have an advantage.
Take those guys turned down on the Shark Tank, many lick their wounds, some get defensive and a few LEARN what they need to do to make their offer more attractive.
So, say a guy wants 5k to start his Blog, I'd have to know what the market is, and how HE is going to market. Of course, his topic has to be right and all that.
But what if he wants to start a forum? Do you think we have enough experience to guide him, or will we need another 21 years to figure it out?
What is missing from ALL the investors, and what I perceive is needed, although I could be dead wrong...there are those who will say, THEY need to have that first, before they ask for money (and they may not be wrong).
But like the person applying for a job which requires knowing MS Excel, and he doesn't...the employment agency, which may offer this to him, with payback after he gains employment, may be busier than the one which says SORRY, YOU DON'T QUALIFY.
I don't know, just spitballing this thing, but I think with some vetting, and of course a willingness to learn attitude on the other side, some pretty good ideas might come out of making a little bit of money available, even knowing most will probably be losing propositions.
Originally Posted by Dien Rice
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
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...
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.
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!