Or maybe investors are not enemies, just someone does not know how to cook them?

    Angels are the same as demons, only much bigger shit
    free translation of Dean Winchester’s replica from the series “Supernatural”

    It has become fashionable to write now - this topic is a partial answer (alternative point of view) to this topic

    So, let us have a budding entrepreneur, for example, let his name be Dima. In order not to become attached to industries and companies, suppose that at leisure he makes multi-colored conical bushings to prevent STDs in Nile crocodiles (hereinafter referred to as CV). All his friends who have Nile crocodiles at home acquire HF from him, while it was noted that when using HF, crocodiles have a greener skin. His friends told their friends about multi-colored HF, and Dima began to constantly receive offers to purchase additional HF.
    Let’s digress from the lyrics - we have an entrepreneur who has an idea or a small production of a product. The entrepreneur wants to develop his idea into production (to turn small production into large). In other words, we have a startup.

    Where to get the money for development?

    1) For years to save money, working for someone else’s uncle, and in the evenings to sit and do a little startup.
    2) Share shares and raise money for them
    3) Get a loan from a bank

    This is the beginning, but where is the end - the MMM advertisement. Let's start from the end.

    3) Get a loan from a bank. More recently, the lending rate for consumer loans surpassed the effective 100%. These are loans for the purchase of equipment, machinery, i.e. small amounts of money.
    However, we have a startup. It all depends on the stage of development of the project.
    - if the project is already functioning, then it must be considered. We consider: Revenue - Cost - Depreciation - Estimated interest on the loan - Taxes = Net profit. We paid only Interest, will there be enough Net Profit to pay off the Loan Body or not? If not, forget about the loan or go look for another bank. If so, consider the other 2 options.
    - if the project is at the stage of an idea, a ready-made business plan, etc. Everything is more complicated. As noted in previous posts, at best they will ask for a deposit, at worst they will just say goodbye. Dima went to the bank and pledged his apartment, car, cottage and boobs to his girlfriend as security

    1) There is nothing to save money and implement your startup on them. Except one . You may be missing time.Time is money - From the composition “Advice to the Young Merchant” (1748) of the famous American scientist and politician Benjamin Franklin (1706-1790).
    Dima stopped drinking beer and puts aside 5 rubles every day. It remains to save 5-6 years on the lathe. In the meantime, he grinds HF on his own and manually paints them with watercolors

    2) Well, I specially left this point at the end, because it is the essence of this article
    So for our startup, you can attract some specialists who will work conditionally for free for a share in the project , or some parasite, whose dad works in the administration of an adviser, who will somehow help.Dima shared his share: with mom for cooking, with Vasya for delivering beer from the kitchen to the room, with Tolya for figured coloring of KV, with Tanya and Ira for other services,
    but in this context we are not interested.
    So we are going to go with the idea of conquering the world of our startup to an investor. Having visited his website, having read an advertisement in a newspaper, etc., we saw that it was necessary to prepare a whole package of documents - a project description, development strategy, analysis of the current environment, potential competitors, payback periods calculations, etc.
    Your Bunny Wrote - we thought and ... got sick to go to the investor.
    Most of the projects are discarded by the investor at the stage of analysis of these documents, without even starting to consider the financial component of the project. Спасибо КЭП, мы этого не знали. Why?

    Documents for applying
    • The main error of the carriers of ideas (I wrote about this in my first post on Habré) is that it is human nature to exalt their ideas. And does your product really need humanity. Ask about this a couple of your friends who do not understand what you offer at all. Are you able to interest them in your product. Explanations will give us the first document “description of our project”. Dima steamed the brain of a blue-eyed blonde for a long time about the advantages of multi-colored HF, and in the end she agreed
    • Next we must write an analysis of the competitive environment. What is your product better than on the market. Who else is going to bring such a product to the market. Maybe Macrohard or PopaTetradka companies have already announced the release of such a product in the future. It makes no sense to compete with them. Спасибо КЭПVasya uses the work of Chinese workers from the next entrance to make HF, he is not going to decorate them, and indeed he doesn’t understand anything in crocodiles
    • Demand analysis and market price forecasts. The most difficult question in the whole package. Here, a review of the industry press, commentary by analysts and foreign experience will help us ... or it will not help. And it is necessary to consider several scenarios. Right - good, optimistic and drop dead
      Justification of costs. (This should really be a justification, so many machines are needed, so many cleaners, etc.) - salary, rent, materials, electricity, etc.
    • Financial calculations are not so bad as he is painted in one of the easiest parts. Collect all that is higher multiply the demand for the price, subtract the costs, depreciation, taxes, calculate this for each year. Calculate different types of payback, and at the same time the cost of your project.
    • And a small but important document describing why money is needed from this goat of a potential investor in a startup. In addition to the necessary things, Dima also included in the list of necessary investments in his startup the purchase of an automatic nosovyryalki, a toy car and ... a costume of Santa Claus There is a small reservation. Compare the cost of the project and the amount of investment required

    Everything - the package is ready.
    This amount of useless documents is necessary not only for the investor, but also for you yourself to understand if your project has any prospects at all.
    Documents are submitted for examination to some department of analysis of pornographic pictures of promising projects, which double-checks all the data, builds its models for the development of your startup and evaluates it taking into account the standard of profitability adopted by the company. As the saying goes, the project is accepted or rejected. What is the probability that you will meet a dinosaur on the street. Well, either meet or not .

    And now let's discuss the topic raised in a post on which the answer is written. Where do the space percentages required by the investor come from .
    • You sell a product, it buys. He seeks to underestimate the value you overstate. Normal position.
    • Since a startup is a high-risk one (if it were a low-risk and highly profitable one, you wouldn’t go to the investor and investors would be at your doorstep in crowds), then most often his assessment will follow a pessimistic scenario
    • Since not many projects shoot, those who shoot must pay for those that fail. It’s like in lending, bona fide borrowers always pay for those who do not repay debts. Therefore, the required profitability for such projects is quite high.
      An example from life. A friend of mine is developing games for FB, he received funding from, well, let's call them business angels, the required rate of return when evaluating his company was 50%. Let's calculate what 50% is and see how such an investor will evaluate such a company (a small excursion into the theory of discounted cash flows).
      Let the startup manager predict the following cash flows for his startup, and suppose the investor’s analysts agreed with him, for 1 year - 150 tugriks , and then a 15% increase.

      The cost of such a business (startup) with a required yield of 50% will be 400 tugriks (cool yes?). Well, if the startup manager wants 200 MNT investments, then the sane business angel (venture investor) will want at least 50% of the company.
    • Do you know what accounting or tax accounting is, what patent protection is, and how to sell the product of your startup. As I wrote earlier (my first post on Habré) no matter how brilliant your product is, if you cannot sell it, then the price is 0 . But the investor can provide all this

    And it turns out that no matter how terrible it looks, the investor’s position is justified. It’s hard to realize, because it seems that coming up with an idea is much more important.
    However, to raise a child (bring the company to the stage of free swimming) is much more difficult than to conceive (to come up with an idea)

    Fu ... I finished writing here, and you read it. And our Dima, meanwhile, received $ 1 billion in cash for 0.00000000001% of the company, Adidos and Jennifer Lopez sneakers, Jeanne Friske, Dima Bilan, Dolly the sheep (underline) for sexual perversions.
    Angel exit strategy from your business.
    Well ... he will not be with you in grief and joy until death do you part. His area of ​​interest is not the operating activities of the company, and he is not an institutional (I can not pronounce this word) investor to hold your shares. Estimate it will be so with everyone to the end. In the end, he will not have money for further investments. Here we will answer the question why there are such things as leaving the company after a certain period.
    - By expert means, the time for establishing a business for each industry
    is established. - The investor believes that if for X years, he did nothing, the business is recognized as not interesting.
    Well, of course, we wanted the first item in our case
    And of course, the investor is not a fool, the price for which at the end will be sold a share in your startup (stop ... by that time it will not be a startup, but a mature business), all potential income from your business in the future will be laid.

    Good luck I will answer questions with pleasure in the comments

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