Forums: Discussions for entrepreneurs and small business.

   I am trying to figure out how much of our own Money my partners and I have will need to be personally invested.  I know that starting out we can`t truely plan to turn a significant profit for at least a year or so probably more.  So how much will a bank or an independent investor look to have personally vested into the venture.  I know my Plan is solid and factual based on my research and whom I am allowed to proof read before we take the next step to presenting to investors and banks to get a loan.  My goal is to secure about $300k for startup should I be looking for 10% or 20% personally vested of what I will need to startup not sure any help out there would be much appreciated.

Mike,

A few comments

1. There is a significant difference between securing investors and getting a loan. If you are not sure of your direction – then you need to be.
2. If you decide to get a loan for your startup – you can talk with an SBA approved lender. They will give you the parameters they use. Remember, lenders want to see assets, so if the business doesn’t have any –you and all partners will be asked to pledge personal assets and sign personal guarantees. [Note- they will likely want each partner to guarantee the full amount of the loan]
3. If you intend to look for investors (equity) –generally they want to see that you have some serious commitment to the project (sometimes called “skin in the game”) This is because they really want you to stick with it if/when the going gets a bit rough. However, most “good” investors understand that being mortgaged to the hilt and deep in debt isn’t the best situation either.
1. Of importance to the investor is –what are you are going to accomplish with their capital. But the big factor will be the team that is going to be charged with meeting the milestones.

 Contact me directly if you want to discuss your specific situation.

Robert Johnson

Thanks ! 

Being new to starting a business I have read every book and article out their on bootstrapping, Angel Investors, borrowing from family, SBA, penny pinching till your blue in the face to fund it solely yourself.  I know my plan and goals are more than attainable, aggressive but attainable and my Partners and I have more than 20% of the funds already, I guess I am just trying to find that perfect investor that will be liquid enough to invest and smart enough to assist rather than just throw money at us.

Is that the right way to look at this or no ?

Thanks again to both....

Funding is tough. If you find an angel of venture capitalist, they will likely want a very large share of your company for what you will see as a small amount of money. This is called valuation. Let`s say you find an investor willing to put up $300,000. How much does that money buy? 10%? 30%? 50%? I bet anyone who is willing to put up $300,000 wants at least 30% or more. The other side of that argument is going to an investor with a few customers already signed up and at least some results in the market. That`s a much easier game. You have 20% of the funds already lined up. That`s $60,000. What can you develop with this money? Can you get anywhere near the market? Can you get a prototype and even a few customers? That`s the right way to get funding unless you have an established track record.