Okay, so I’ve been watching reruns of the Dragons’ Den and I know everything I need to know. I’ve got a (smallish) stack of cash. What do I do now?
Well if they’re not a publicly traded company, you need to get in with the owners and offer to partner up or buy a stake in the company.
If they are publicly traded, just buy a significant portion of their stock.
I would try and find a local Angel Investers group and see if they would allow you to join them.
Angel investor groups are probably the best way to start.
You should also contact local valuation experts. They may have some leads for you, since they deal with buying and selling companies all the time. More importantly, you’ll want a valuation expert on your side to vet any potential deals that come through.
You could try your local Chamber of Commerce. Talk to local colleges and see if any of them have entrepreneurship programs. Look for connections through other groups you’re a part of - churches, clubs, etc.
However, I’m not convinced that investing in small, private companies is a good way to use anything other than an immense stack of cash. Venture capital firms make money because they back 9 companies; 8 burn through cash and fail miserably, 1 makes a small return and the other is a home run that pays back tens or hundreds of times the original investment. Venture capital firms are also very good at identifying the kinds of companies likely to produce a significant return. If you don’t have $500 million so that you can back 20 or 30 startups, you might as well take the money to Vegas.
Thanks for the info.
I don’t think you’re going to be getting as much return on that 10th of 9 companies as you’re hoping.
I don`t know of any angel groups that will allow a non-accredited investor work with them so if you don’t have a significant income or significant asset base it’ll be difficult. It’s only $200,000/year or $1,000,000 in assets but obviously there are a lot of people who do not meet that requirement.
You’ll also have a much easier time is you’re experienced enough to contribute to the group besides with cash. If a couple investors are doing due diligence for the whole group on a medical equipment startup and a couple others are looking at a new software firm the group might invest in, are you going to show up and say “well, I’ve got nothing but money but I’d sure like to take advantage of your collective expertise!”? They’ve all got money. Pooling talent is a big part of it.
I believe these are in fact legal requirements to prevent Ponzi schemes and such. Not impenetrable, but makes things more difficult, for you and the other investors.
That is true too.
I agree with the posters, but it doesn’t seem fair. Would be cool if there was a sort of market or online community connecting small-time investors and small-time business owners (or wannabe entrepreneurs). Lots of people have ideas and need just a few thousand to advance a step. Even if it wouldn’t typically be “smart” or profitable, would sure be a fascinating experience for everyone (a lot more interesting that shitting through money in Vegas or in stocks). In fact, I’d be surprised if these things entirely didn’t exist.
This is actually what I had in mind but I don’t know what the name of the thing is that I’m googling for. My expectation is not to make a ton of money. I was kind of hoping to earn a little and help someone a little, really.
If you’re looking for modest returns and aren’t necessarily wanting an equity stake in the company, there are sites that let you loan money. The interest rates can be better than you’ll get through most sources, but I can’t really speak to how the risk/reward ratio comes out. One example is Lending Club.
That just looks like a bank. A fascinating dotcom take on a bank, but a bank.