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Getting Investors to Pay

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KeenanM

New Contributor
Aug 10, 2019
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I thought I would never be here asking for help, but here I am.

Backstory: Came up with a genius business idea, internet based(no physical product), market competition is there, decent barrier to entry, current supplies under serving the customer demand etc. I did all the leg work hired consultants to develop the MVP plan. Spoke with 3 investors... two relatives and one friend. All three while not completely understanding the complex technology can see this is a winner. In person all three agree to provide their seed money $2k each for 15%. I get back home after Christmas holidays and sent account info over for transfers and nothing.

My question: How often do you follow up with investors? Do I need to call each specifically , would another reminder text work out?

Also there's this piece. Through pitching the company I've realized the true value. Due to this I am tempted to wait on my tax refund and bet the house on myself.
 

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Onimusha

The Notorious
FASTLANE INSIDER
Oct 6, 2017
19
14
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A very hot place
It sounds to me that you believe in this idea WAY more than your friend and relatives, which, to be honest, is fairly predictable.

Get a contract drawn up, even do one yourself, and have them sign it.

You will be amazed how people become more receptive to cooperate after they sign the line that is dotted :)

Also, you MUST have a deadline for everything, and they must know about it too.

All in all, there's nothing wrong with "gently" pushing your investors daily to put their money where their mouth is.
 

GigMistress

Bronze Contributor
I've Read UNSCRIPTED
Speedway Pass
Nov 19, 2019
104
293
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A cornfield in the Midwest
I thought I would never be here asking for help, but here I am.

Backstory: Came up with a genius business idea, internet based(no physical product), market competition is there, decent barrier to entry, current supplies under serving the customer demand etc. I did all the leg work hired consultants to develop the MVP plan. Spoke with 3 investors... two relatives and one friend. All three while not completely understanding the complex technology can see this is a winner. In person all three agree to provide their seed money $2k each for 15%. I get back home after Christmas holidays and sent account info over for transfers and nothing.

My question: How often do you follow up with investors? Do I need to call each specifically , would another reminder text work out?

Also there's this piece. Through pitching the company I've realized the true value. Due to this I am tempted to wait on my tax refund and bet the house on myself.
Two things:

1) You have a "genius idea" and know how to execute on it and you're giving away nearly half of your company for $6,000? Are you sure about this? Seems like maybe this delay will turn out to be the best thing that ever happened to you.

2) It doesn't sound like you had a contract, which may account for your investors treating this loosely. Getting investments in your company on the basis of a verbal interchange (or even email or whatever) and a bank transfer is risky business. You need to spell out your terms clearly, on paper--and one of those terms would have been the timeline for them depositing funds. If you're going to move forward with this, formalize--ESPECIALLY with friends and relatives. They need to very clearly understand what they are and are not getting from this investment, that there's no guarantee of a return, under what circumstances they may get payouts, whether their interests are transferable (and so on, and so on) or there will be conflict later.
 
OP
OP
K

KeenanM

New Contributor
Aug 10, 2019
9
2
11
Two things:

1) You have a "genius idea" and know how to execute on it and you're giving away nearly half of your company for $6,000? Are you sure about this? Seems like maybe this delay will turn out to be the best thing that ever happened to you.

2) It doesn't sound like you had a contract, which may account for your investors treating this loosely. Getting investments in your company on the basis of a verbal interchange (or even email or whatever) and a bank transfer is risky business. You need to spell out your terms clearly, on paper--and one of those terms would have been the timeline for them depositing funds. If you're going to move forward with this, formalize--ESPECIALLY with friends and relatives. They need to very clearly understand what they are and are not getting from this investment, that there's no guarantee of a return, under what circumstances they may get payouts, whether their interests are transferable (and so on, and so on) or there will be conflict later.
1. Lets be clear there are other companies doing the same thing I'm looking to do. I say genius only because of the proven upside. This will be a large portion of the company, but only relates to the one aspects, for example I can branch out with servers and other services in this same area.

2. There is no contract lifelong family and friends business of a handshake. Once LLC is formed and articles signed that will act as the formal contract. Everyone is well aware there is no guaranteed return and understand the six month test time frame.

I appreciate the response and this gives me somethings to think about.
 

100k

Gold Contributor
Read Millionaire Fastlane
Speedway Pass
Oct 20, 2012
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Best way to get investors to invest is to create a viable proof of concept - prove there's a demand for your product.

Create a MVP, generate sales & profits - then go to them and say "Look, I've created XYZ, I'm generating 123 in sales and 456 in profits. With 789 in investments I'd be able to spend it on EFG and take the business to XXXX figures in XX months. You'll get your original investment back plus XX or you can buy shares if you prefer."
 

minivanman

Platinum Contributor
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Mar 16, 2017
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DFW
That is GREAT news! Never involve friends or family in your business unless you don't like them. If you don't like them, try to get $10k each out of them before you twist the knife 2 years from now.....
 

GigMistress

Bronze Contributor
I've Read UNSCRIPTED
Speedway Pass
Nov 19, 2019
104
293
160
A cornfield in the Midwest
1. Lets be clear there are other companies doing the same thing I'm looking to do. I say genius only because of the proven upside. This will be a large portion of the company, but only relates to the one aspects, for example I can branch out with servers and other services in this same area.

2. There is no contract lifelong family and friends business of a handshake. Once LLC is formed and articles signed that will act as the formal contract. Everyone is well aware there is no guaranteed return and understand the six month test time frame.

I appreciate the response and this gives me somethings to think about.
In my prior professional life, I was an attorney. Unfortunately, friends and family end up in bitter conflicts over business far more often than arms-length business partners and affiliates do. It's mostly because of the perspective you take here: everyone assumes they're on the same page and there won't be any conflicts and they can work things out and will treat each other fairly and all that, and everyone means it--but, no one nails down exactly what those things mean in this context, and people do have differing expectations. So, through innocent misunderstanding, one or both parties ends up feeling like the other moved the ball.

I see a possible example in the brief information you've shared here: have you explicitly described the limitations on what you consider part of this business to your investors and made it super clear that if you decide to build other services on the foundation they've helped fund, that will be something separate that they don't get a piece of?
 

Rabby

Gold Contributor
FASTLANE INSIDER
Read Millionaire Fastlane
I've Read UNSCRIPTED
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Aug 26, 2018
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Florida
Don't follow up with them. Giving away 15% for $2k is crazy. Sell your sofa on ebay to raise money, if that's the alternative. Unless these people are experienced business managers who agree to participate in building the business.

Network with some smart investors and see if you can get someone who has "done this before" to contribute seed money. You're looking for less than 10k! It should be a small amount to an experienced investor, and if you convince them to part with it, it's a good sign you've thought things through.
 

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