Comments on: How much does it cost to find an Investor?

By: Maarten van der Walt

Maarten van der Walt — Mon, 31 Jan 2011 16:43:38 +0000

Is their any Investors?? I am three years bussy trying to raise caputals for my project, Game Breeding project in South Africa with no luck, many scam investors all over the world. I already lost thousand of dollars. Their is scam middle men all over the world. I also shall not pay upfront fees.

By: Zulfiqar Deo

Zulfiqar Deo — Wed, 19 Jan 2011 22:54:31 +0000

I agree intermediaries need to be compensated for their valued services. I also feel they tend to use models which discourage them from looking at new ways of funding what they do. The conservative model being an upfront fee and a success fee. A standard model being a success fee. However, I have come across companies who charge no fee before or after ! The last category tends to have companies that are trying new ways of encouraging the interaction between the investors and startups. They seem to have found new ways of paying for their services.

I hope the last of the three starts to replace the others as the main stream way of helping startups.

Look forward to your comments.

By: David Landsberg

David Landsberg — Wed, 19 Jan 2011 16:48:11 +0000

Intermediaries are an important filter and can often sort dreamers with fanciful ideas from those with a credible proposition and an ability to deliver. The Intermediary can target specific investors by interest, and present a plan in a format that can be understand at a glance – however – when it’s not seed funding, but investment into a trading business that’s required, many investors (Jetland included) like nothing more than to stumble upon it in the raw, without being sugar-coated by an intermediary. These tend be to be discovered rather than introduced by Intermediaries….

By: Pip Errington

Pip Errington — Mon, 10 Jan 2011 18:30:37 +0000

We advise individuals and small groups looking to invest in new and emerging technologies. Angel/Seed type investment in the UK suffers from being less competitive than other markets. Government could really help in a couple of ways:
Leveling the playing field, so that investors in new business in the UK benefit in the same way as they do in other countries (for instance; tax breaks and other incentives are 2/3 times greater in real terms in several European markets)
Reduce and simplify red tape until the business has achieved a reasonable size and turnover (penalizing companies for taking on more people and growing whilst still very small is a real disincentive!)

As already mentioned, we too have found that most seed and early stage investment network providers take advantage of the inexperience and/or desperation of people seeking funding. Unacceptable charges up front and demanding an unreasonable equity share being two of the more obvious examples.

However, we have also found that too many people seeking funding, have totally unrealistic expectations of their value and abilities and their idea’s value. We often act on behalf of private equity groups, providing an overview of the overall viability of the company they are considering investing in. Frequently a very quick review of the business shows that the idea may be good, but that it will never work with the management in place.

There is another area where the seed/early stage funding model in the UK falls down. In other markets it is quite normal to structure an offer based on a business model that ensures funding for appropriate management expertise and adequate promotion of the product. All too often a quick analysis of why a business is failing, or has failed, shows inadequate management and insufficient promotion of the product to the market.

There are ways of structuring a business model that provides the business with the resource it needs. Entrepreneurs looking for funding need to realistic about what ‘their baby” is worth and what they may have to give up if it is to flourish, but government needs to cut red tape and investors take a measured view of what return can be expected by when.

- :
- Simplified regulatory/legislative requirements making the UK genuinely comparable with other countries.
- Real tax incentives for investor, until , making the UK = less operating cost and

By: Duncan McFadzean

Duncan McFadzean — Mon, 10 Jan 2011 16:38:01 +0000

Max, thanks for branding all investors (sorry, in the main) leeches. As one of the aforementioned leeches, can I run some alternative numbers past you. The typical return for an angel in the UK is around 22% studies have shown (similar in the US). That’s not an exceptional return. 90% of the investments made usually return at best the money made. And that’s after the average angel turning down 6 out of every 7 things they look at. So we have on average a 1 in 70 success rate, throw in a ton of time to 69 things that flop, and end up with a mere 22% return. Of course, not all angels are average. It’s all about finding the exceptional play, not the average play. Average plays don’t give that level of return. We’re not all leeches, but stats show that we have to throw out the majority – to be fair I’ve been pitched some stuff that no-one would fund anyway at points.

By: Duncan McFadzean

Duncan McFadzean — Mon, 10 Jan 2011 16:30:04 +0000

Lee, I think you’re talking about something like Angel List - which is rapidly taking off in the US. Or seedsummit in Europe, formed by the guys behind Seedcamp. Both of these are tech focused.

By: Duncan McFadzean

Duncan McFadzean — Mon, 10 Jan 2011 16:26:31 +0000

Peter (Salkeld), if that were true then why isn’t it fair to say the same to the founder, and that they can’t have a wage? They’d start to tell you how they have to pay the bills and buy food to live – so they need an income, which I’m happy to fund (to an extent) – so why’s it different from an investor looking for overhead recovery?

By: Lee Tracey

Lee Tracey — Sun, 09 Jan 2011 15:02:51 +0000

Further to my response above it could be a further service to have a record of experiences so that new seekers could evaluate. For instance I paid £400 to be listed on the ANGEL NEWS system but did not receive a single viable response – I did receive four scam replies from Nigerian style scam artists. I also paid to appear on EQUITY ASSIST but did not receive a single response. Was my proposal a dud? I do not think so for from a different system I raised nearly £300,000 in 30 minutes. The problem with the system which funded me is that it does not want to be promoted as it has only genuine wealthy Angel members and only accepts through an introducer who carries out in-depth pre-screening. I was not charged anything upfront. So this says, when coupled with my comments above, that pre-screening of both investors and seekers is an issue that needs to be addressed. As a seeker I do not object to paying an upfront fee of £100 provided I am guaranteed that the audience I am pitching to really do have the muscle to invest if they like what they hear.

If I was an investor then I would soon get tired of listening to hours of rubbish. In learning my pitch I spent time as a ( pretend ) investor – yes I admit the deception – but I sat through hours of impossible crap and hopeless schemes. It soon became obvious that in many cases anybody could pitch if they paid the fee.

Lee Tracey

By: Lee Tracey

Lee Tracey — Sun, 09 Jan 2011 11:21:48 +0000

A lot of sense coming from a mixed bag of interested parties. I think I know how to solve the key issue but am not sure of the mechanics of how to go about it. My solution would be to have a thoroughly checked register of “investors” that a funding seeker could access to find out if the investor was for real and also how real. The protection for the investor would be that the funding seeker would need the permission of the investor to access this information and would pay a nominal fee of about £10. Any genuine investor looking at a project that was of serious interest would then allow the funding seeker to access his ( the investor ) filed history and report. If the investor was not registered or refused permission then the funding seeker could draw whatever conclusion he desired. I have put this plan up to two regular investors I know and both have said they would accept it without reservation as it would prove their standing and would only be available to fund seekers they were really interested in. As one said:- ”…if you are skilled in the financial world you will know how to check me anyway so why should I be afraid to allow a serious prospect also check me; I will check him.

Such an organisation could also offer a professional service of setting up test “Dragon Den” covens round the country where, for a nominal fee of about £100, you could test your pitch and scheme and get torn to pieces but without any consequent damage other than your ego. You would not get money from these “covens” just a Beta test run before pitching to the real investors. The coven would give you marks out of 100 for each test undertaken and when you receive a high number you could quote this to potential investors and allow them to receive a copy of the your coven report.

It would be a start to remove all the false investors from the scene for so many of the speed pitching operations only have phoney investors – they are just after your fee money.

If anybody out there thinks the above has legs, contact me.

Lee Tracey

By: Max Morecroft

Max Morecroft — Sat, 08 Jan 2011 17:12:35 +0000

Having been in a position of talking to investors with a number of products, all i can say is financial investors or/money angels/ are in the main no more than money sucking leeches.
they will interview 10 candidates, and maybe 1 will survive but the price he will pay to get half the capital he requires will be anything up to 75% of his company for at least 5 years, then they want an opt out clause that gives them more money.
i personally think these people are worst than the worst loan sharks.
i attended a meeting quite recently where a business angel was addressing us, and he said they would normally take about 40% when i asked if they had ever taken 40%, his reply was no I was just giving that as an example.