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How to go about looking for investment for my company

  • 29-09-2020 10:53am
    #1
    Registered Users Posts: 1,152 ✭✭✭ zig


    Hi all,

    Just to quickly note first: this honestly isnt a thinly veiled pitch, its a genuine query, thats why I dont want to want to get into the nitty gritty of profit/revenue and product itself etc.

    I have a software product which is showing to have really good potential, we have customers who are national organisations and tiny low paying customers, we also have private enterprise level customers, and it fits into most industries.

    Its not making its own profit yet and has relied on loans/investment from ourselves (co-owners)/and some grants from local enterprise etc.

    Its sort of coming to a head where we badly need more developers and a bigger marketing budget to get pending projects over the line properly but also be able to comfortably grow beyond that.

    So Im not really talking about a 15K investment here. More like 150K-200K if we really want to give this a proper shot.

    Im just wondering where do we start to find potential interested parties.


Comments

  • Registered Users Posts: 542 ✭✭✭ jonnybravo


    Don't know much about investing in a start up but some suggestions below. Should look at an overall plan and ensure that €200k is enough. Developers are very expensive.

    1) If your company has the potential to export then Enterprise Ireland invests in companies. They also give grants for development which would mean no equity given away.
    2) Bank loans but would probably need some personal security
    3) EII schemes (https://www.revenue.ie/en/personal-tax-credits-reliefs-and-exemptions/investment/relief-for-investment-in-corporate-trades-for-in/employment-investment-incentive.aspx). There are some funds that sepecifically only invest using EII schemes (think BDO have one).
    4) Get advice from professionals like Davy's, etc but they are expensive.


  • Moderators, Business & Finance Moderators Posts: 7,806 Mod ✭✭✭✭ Jim2007


    zig wrote: »
    Hi all,

    Just to quickly note first: this honestly isnt a thinly veiled pitch, its a genuine query, thats why I dont want to want to get into the nitty gritty of profit/revenue and product itself etc.

    I have a software product which is showing to have really good potential, we have customers who are national organisations and tiny low paying customers, we also have private enterprise level customers, and it fits into most industries.

    Its not making its own profit yet and has relied on loans/investment from ourselves (co-owners)/and some grants from local enterprise etc.

    Its sort of coming to a head where we badly need more developers and a bigger marketing budget to get pending projects over the line properly but also be able to comfortably grow beyond that.

    So Im not really talking about a 15K investment here. More like 150K-200K if we really want to give this a proper shot.

    Im just wondering where do we start to find potential interested parties.


    Start with a very written business plan and ask for a lot more money as an initial investment say $5m, if you want to be taken seriously by venture capitalists.


    You have one advantage over most people seeking venture capital - paying customers, so that should get you a hearing in some places that would not normally consider you.


    Avoid the guys that are willing to give you 200k, because they are the bit players and they will want it back too soon, which could cost you your business.


  • Registered Users Posts: 1,152 ✭✭✭ zig


    Cheers all, some food for thought anyway, we are looking into Enterprise Ireland alright, I wasnt aware about the possibility of getting development grants without giving up revenue.

    Good point as well re: the 5 million VS 200K, to be honest I wouldnt have thought of that.


  • Registered Users Posts: 1,298 ✭✭✭ RedRochey




  • Registered Users Posts: 2,240 ✭✭✭ garrettod


    Asking for €5m if your business doesn't have a legitimate need for it, and can't show how it'll sensibly use it to grow the company, could get you laughed out of a room, as quickly as you got into it.

    You need to be realistic about what the business is worth, and what it would be worth, post investment. You also need to be prepared to give up equity in your company, unless you are fortunite enough to get Enterprise Ireland to invest, by way of Preference Shares (which can also be converted to ordinary shares, in certain circumstances).

    Preparing a good business plan is definitely the right way to start. Give it careful thought and consideration, get advice from your accountant etc. In fact, Local Enterprise Offices give a grant (I think its €2,500) to help fund external professional advice, so check and see if you can avail of that.

    Depending on what stage your business is at, it might qualify for a Bank loan. I know that you said you aren't making a profit, but ability to repay debt from future cashflow is also an important consideration, for the Banks. If so, take a look at the SBCI's Growth Loan. Even if this were to only offer part of the overall solution, there are benefits to this product (such as the SBCI providing security for the loan (or part of it)), and you not having to relinquish any equity in your business.

    The EIIS schemes are worth exploring, as mentioned above.

    Another option, if you do decide to go for a smaller sum than multi million Venture Capital investment, might be to look at Angle Investors. Like VCs, they'll want a healthy return on their money, but they do serve a purpose and you'll sometimes find selling investors that also bring skillsets to the deal, at a cheaper cost than say a VV appointing a Director to your company's Board. HBAN are one organisation that brings investors togeather with companies seeking investment.

    While it would take a while, you might also want to explore doing some sort of partnership with a larger company, possibly one that can additional custom to you, by helping you sell to their existing customers.

    Thanks,

    G.



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  • Banned (with Prison Access) Posts: 1,306 ✭✭✭ bobbyy gee


    You sell part of the company


  • Moderators, Business & Finance Moderators Posts: 7,806 Mod ✭✭✭✭ Jim2007


    garrettod wrote: »
    Asking for €5m if your business doesn't have a legitimate need for it, and can't show how it'll sensibly use it to grow the company, could get you laughed out of a room, as quickly as you got into it.


    He needs developers, he needs marketing and he needs to be able show great future potential and he won't even get into the room to take with serious venture capitalists for less.


    He'll just end up talking to bit players, which could cost him the business.


    And that is my experience.


  • Registered Users Posts: 2,240 ✭✭✭ garrettod


    Jim2007 wrote: »
    He needs developers, he needs marketing and he needs to be able show great future potential and he won't even get into the room to take with serious venture capitalists for less.


    He'll just end up talking to bit players, which could cost him the business.


    And that is my experience.

    Do you know anything more about his business than he's posted here?

    If not, then your making assumptions that may be right or may be wrong.

    Thanks,

    G.



  • Registered Users Posts: 1,435 ✭✭✭ TiGeR KiNgS


    Would offering an employee stock option plan to your developers work ? might be a way to lower your short term cash outflows ?


  • Registered Users Posts: 1,152 ✭✭✭ zig


    Would offering an employee stock option plan to your developers work ? might be a way to lower your short term cash outflows ?

    Something to consider alright but I’d imagine most employees just want a normal paid job and not to be getting into that stuff? Especially given the pay drop would have to be big enough from our point of view to make it worth our while.

    For example , to get someone who should be on 55K year down to 45K may not be worth our while giving away shares unless we’re talking an absolutely tiny %.


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  • Moderators, Business & Finance Moderators Posts: 7,806 Mod ✭✭✭✭ Jim2007


    garrettod wrote: »
    Do you know anything more about his business than he's posted here?

    If not, then your making assumptions that may be right or may be wrong.

    Have raised venture capital on 3 occasions and currently involved in two fintech startups.


  • Moderators, Business & Finance Moderators Posts: 7,806 Mod ✭✭✭✭ Jim2007


    Would offering an employee stock option plan to your developers work ? might be a way to lower your short term cash outflows ?

    When you pay peanuts you get......

    Good developers get these kind of offers at least every month. You’ve got to have a very attractive business offering to get them on board and if it is that good, it’s good enough to raise capital as well.


  • Registered Users Posts: 5,440 ✭✭✭ daheff


    maybe start researching the angel investors network (as a start).

    or look at the loan schemes like linked finance. it might get you enough to start moving in the right direction.


    most important thing if you go to investors is to have a business plan. Know what you will spend the money on, and how it will generate a return so you can repay the investors (loan) or have some kind of exit mechanism for them.

    Key things for investors are a return on investment and how to extract it once it reaches a certain point.


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