Investor return on investment/ownership

brownbabygirl

Hi!

I am completing an online form for Angel Investment. Quite new in business and not sure what business angels expect in terms of the deal. I dont want to mess this up so here goes my question:

I know I am proposing a return on investment of 30% within 2 years. What I understand by this is that by the end of Year 2 of trading, the investor will have their investment back PLUS 30% of that amount. Is that correct??

How does this differ from the SHARES/OWNERSHIP % they will expect in the company?

Do they normally get their investment back PLUS the return AS WELL AS shares in the company? Or is it either of those or BOTH?

To help, here are the specific questions on the form given as a guide to entrpreneurs:

• Information about what you’re offering the investor in return for the investment (e.g. equity stake, loan arrangement, security, etc.)
• A breakdown of what return the investors can expect (e.g. return on investment, time frame, exit strategy, etc.)

Please be nice and refrain from judging as to my competency in business etc. Feel free to scroll by if it is a naive question.:eek:

paulwf

Is this for the college? I admit I'm not an expert in this area but I thought angel investment was generally for high risk but high return new concepts where it would be hard to get traditional loans. Think new media or inventions (we've all seen Dragons Den which is more entertainment than business but gives a rough idea). Angels want a high ROI as they know a lot of their projects will fail, but every so often one will give a good return.

Wouldn't a college be best off going down the traditional loan route or attracting a committed business partner rather than using an angel?

brownbabygirl

Hi Paul,

For reasons I can't go into, we have decided to take a stab on the investor route. thanks

paulwf

Investors usually like some sort of trading history even if it is just a small scale proof of concept. Have you got any existing figures to base future projections on?

Angels are usually involved with second round funding once the idea has been established but needs a big "push" to really launch it. In turn the business needs to be able to scale up to bring big rewards. Look at the dot com boom...without the physical constraints of a shop and catchment area the sky is the limit for some sites like Amazon, Ebay, Facebook, but the risk is also high with lots of casualties.

Your business doesn't scale up in the same way, presumably you will be taking on a set number of students each year?

There is no harm in trying the angel route as it is just an fancy word for an investor, but I think you'd be better off going down the traditional business partner route than looking for venture capitalists. Concentrate your efforts where you are most likely to find success.

Good luck with the project, I hope it works out.

brownbabygirl

paulwf wrote: »

Investors usually like some sort of trading history even if it is just a small scale proof of concept. Have you got any existing figures to base future projections on?

Angels are usually involved with second round funding once the idea has been established but needs a big "push" to really launch it. In turn the business needs to be able to scale up to bring big rewards. Look at the dot com boom...without the physical constraints of a shop and catchment area the sky is the limit for some sites like Amazon, Ebay, Facebook, but the risk is also high with lots of casualties.

Your business doesn't scale up in the same way, presumably you will be taking on a set number of students each year?

There is no harm in trying the angel route as it is just an fancy word for an investor, but I think you'd be better off going down the traditional business partner route than looking for venture capitalists. Concentrate your efforts where you are most likely to find success.

Good luck with the project, I hope it works out.

Hi! We finally linked up with 2 experienced business partners through our friends network who are very much into the project. We discussed about the investor route and they have networks they could scope out some potential investors. But I was so shocked as to the kind of % shares they would expect!!!:eek: so you were spot on.
We did intend to start to start with over 200 students but will go down the loan route and start small then scale-up. now...finding that business loan!

thanks!:T