I have seen lot of smaller investors who are willing to invest for smaller time and smaller amounts which collectively can bring impact. I see funds are raised on startup valuations and investors doesn;t get anything until company is acquired or go IPO. Please let me know what are possible options small investors can opt?
It really depends on the type of company and the cash flow profile. Many tech startups like Facebook, Twitter, Netflix, Amazon, Uber, remained cash flow negative for years to support growth even though the company was growing in value and generating positive ROI for investors. Most businesses cannot afford to support that kind of growth and don't necessarily need to. If you have the type of business that will reach cash flow breakeven quickly and start generating free cash flow in the first couple of years, you will definitely be able to provide investors a positive cash ROI through either dividend distributions or repurchase of their shares. Alternatively, they may be able to sell some of their shares to new investors during subsequent rounds. This would allow them to realize a return on the investment prior to exit.
I know one gentleman that raised 5M and then raised 10M and bought out some of the early investors with funds and then did it again - with better valuations each time - raising 20M and then all early investors were out in less than 3 years with full ROI.
Ok, strictly speaking this isn't an answer to your question.
For someone with an idea seeking investment, a common criticism of venture capitalists is that they are too focussed on the short term returns and fail to see 'the bigger picture'. Usually, anticipated returns within 2 to 5 years seem the norm. I have recently found an investor who wants an active roll and wants to remain involved long term, which is just what I was looking for.
There are probably situations where an investment could yield returns in less than a year. An example might be in property development / renovation. But in these instances, many entrepreneurs might prefer to get a loan, which should be available if there is a convincing business case.
In summary, I think the law of supply and demand applies here. And also pragmatis. There may not be much demand for investment with rapid ROI required, and not many investees would be able to estimate getting returns that rapidly.
If the business has net profits, the equity shareholders can receive dividends if the company chooses to offer them.
You can use a low cost Regulation CF to raise up to $1M of equity per year from small investors in small amounts. Under Reg CF, you can issue equity, debt, revenue participation certificates, coupons and/or warrants. You can mix them all up in any combination you want.
For example, you could issue $100 units that would include:
(a) a warrant entitling the owner to buy stock in the future at a certain price,
(b) a transferable coupon entitling the owner to a one time 25% discount on your product or service
(c) return of the $100 of principle plus 5% interest with the following restrictions:
..... repayment doesn't start for a 12 month grace period
..... the rate of repayment is capped to X% of gross revenue
Regulation CF offerings are intended to be low cost. You can advertise them within the limits of the regulation's rules. You can raise amounts from $50,000 to $1,000,000.
But you do have to use an SEC/FINRA registered platform to do the raise.
To my knowledge, the business models and software of most or almost all the SEC/FINRA registered platforms out there are only set up to do only straight equity.
I do know one Reg CF Platform that is willing and able to complex deal structures like the ones I mention above. They are located at:
You Will have to look at a number of factors. First of all is, the nature of the business itself. Is it a high yielding one involving innovative solutions to enabling people who are hard pressed by the present economic clime to navigate it without losing their lifestyle and gaining the ability to scale their lifestyle. Take for instance the 15 million or 26million people who won't be able to acquire health coverage. If Someone were to provide an alternative solution that is economically feasible and practical then you know that you Will be an instant hit. If you invest in that you can cash out in a year or 18months.
You Need a lot of due diligence on your part in order not to get misled.
Secondly , you need to understand the entrepreneur. Is he/she capable of pulling it off?
This Is very necessary as most entrepreneurs learn on the job and It's only one who is driven by the joy of fulfillment that will get you to your promise Goal.
So, Yes it is possible. Only with a solution to which the market is waiting for it now.
Definitely. Collect a royalty on every sale or a percentage of yearly revenue.
We implemented a sort of royalty deal. Our investors received their first ROI check within 5 weeks.
Yes, there is a way to get ROI before a year. From 9th month onwards, the ROI will start coming.
John Head funny how much that sounds like a ponzi scheme!