Startup funding for beginners
Hitting up your mum for startup capital can be risky business
Thursday, April 29 2010 || Investment || BY Kim Triegaardt
The challenge is always that the ‘Three F’ funding or personal resources are usually the only option available for a company at the start. Often they are not hi-tech or high-growth ventures and are not eligible for venture capital money. They may not have much in the way of an established product, only an overriding sense of self-belief, commitment in and passion for what they are doing.
Madelin agrees he was acutely aware that while he desperately needed money, he knew there was considerable risk for his friends and family. In hindsight, this caution also clouded his judgment in setting up the share agreement.
“Everyone is on an equal footing. I should have formatted the agreement so that people got different classes of shares. Early investors should get non-voting shares.”
While none of his shareholders have seen any return on their investment, he says it was always made clear that it would be a medium- to long-term investment. “The return comes when the company is sold,” says Madelin. “But the shares are now conservatively valued at double the purchase price.”
Izon’s investors have so far put $6.4 million into the business and also don’t have much to show for it — yet. Van der Voorn says all indications are that by the end of 2010 Izon should be cashflow positive and his investors would have doubled their money.
For any investor it’s the return on their investment that’s at the heart of the relationship. “After all,” says Holliday, “you want to take a small piece of what you hope will turn into a large pie.”
How to stop a handshake loan becoming a headache
1. Plan: Where is the money going to come from at each stage of growth?
2. Get legal advice: It might be costly, but get advice before you get a loan
3. Negotiate: Establish a regime that works for everyone
4. Get support: Organisations such as NZTE and FRST provide grants for some businesses
5. Be realistic: Make it clear that there might not be any return in the short term
contact me at drfaisal@el-azizinvestments.com
Posted by Dr. Aziz Faisal at 07:56 on July 5, 2010
I looking for a american Partnership or investor to my technology. I developed that tech that make houses wuth a price very less, into 75% than there are today in USA. Also that houses are the more strong house in all world. I need 1,5 million dollars to investment. The time to intall the company is 20 mounths. I want sell that technolohy for franchasing system. The profit per year is more or less one billion dollars. Thanks Paulo Muller from Brazil
Posted by paulo muller at 08:53 on June 14, 2010
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