December 22, 2009 at 11:03436% risk-free return for 2 years? Easy!
Yes, you heard right. It is 436% in two years. It is risk-free. And yes, it is profitability. But, in order not to mislead you, I’ll immediately make a reservation that the discussion below will not be about the perpetual motion machine or the underground Cheops pyramid. Below we consider a spherical, like a horse in a vacuum, venture financing scheme proposed by one investor. But first things first.A bit of history
September is the month. When promoting one of our projects, we come up with the idea of creating one service that greatly simplifies the work of PR. Without thinking twice, in a couple of weeks we put together a beta version, and in October the service has already moved into the commercial phase. Going out in the same month for a profit of $ 1000, we were puzzled by the development of the service and went into the stage of active search for investors.
More interesting ...
Partner search
As you know, the availability of a ready-made prototype, and even profitable, greatly facilitates the search for investors. There were a lot of people who wanted to meet. But at the exit, everyone was either scared away by big risks, or the volume of required investments was too small to cooperate with us (we asked 1,000,000 rubles). This continued until mid-December, until we met the hero of our story. In order not to initiate the boiling of brown liquids, we will leave his identity a secret. And under the pseudonym Ostap Bender, he looks more colorful.
The speed at which he made decisions was astounding. From the initial description of our system to the coordination of the business plan and financial model, only 4 days have passed! It looked just amazing compared to other investors. I was very pleased with the involvement and interest of the person in the project. And after consideration and approval of all documents a meeting was scheduled.
Night, street, lantern, pharmacy
Moscow, evening, city center, bistro. Bistro? Well yes. A bit strange, of course, is the choice for business meetings, but the owner is the master. I go inside and dial Ostap's phone. A nice-looking man standing in line picks up the phone. We meet, take tea, coffee and go to a secluded corner in the far corner of the cafe. Having washed down the pancake with tea, my interlocutor begins the conversation. As often happens, he talks a little about himself and smoothly moves on to his principles of venture investment. In words, everything looks like in a fairy tale. Investments go in tranches, according to the approved plan. The term of his participation in the project is 2 years. If during these 2 years the profit from the project exceeds his investment, then he will give us his share. Great, isn't it? But what if there is no profit? Nothing, he answers. That’s why investments go in tranches, so that in the absence of a positive growth trend to minimize their losses. It is under these conditions that over the past 3 months they have been invested in a little more than 20 projects of varying degrees of readiness. Looks great, right? Having agreed with these principles, we proceed to discuss the project and after 20 minutes we come to the conclusion that we are interesting to each other, and Ostap can even assist in the early registration of our joint venture right up to the New Year. On this note, we say goodbye and agree that the next step I expect from him constituent documents. we proceed to discuss the project and after 20 minutes we come to the conclusion that we are interesting to each other, and Ostap can even assist in the early registration of our joint venture right up to the New Year. On this note, we say goodbye and agree that the next step I expect from him constituent documents. we proceed to discuss the project and after 20 minutes we come to the conclusion that we are interesting to each other, and Ostap can even assist in the early registration of our joint venture right up to the New Year. On this note, we say goodbye and agree that the next step I expect from him constituent documents.
“Four hundred relatively honest ways of taking money”
With a sense of accomplishment and looking forward to replenishing my portfolio with another successful project, I drive home. Once again, amazed at the speed of my future partner, I find in the mail a complete set of constituent and not only documents. But suddenly, the feeling of joy quickly gives way to the feeling that an elephant was giving a shit about me, then fell from above, crushed and foul. This condition was caused by an amazing explanatory note, which was attached to a very strange set of documents. Opening the letter, I immediately sensed something was amiss when I saw several loan agreements among the statutory documents. And having opened the explanatory letter, all my hopes finally collapsed. Forgive me, various copyrights and other patent trolls, but I will quote in full:
“The entire volume of investments is recorded as the contribution of the founders to the authorized capital of the enterprise (UK).
Shares in the authorized capital are distributed as follows: 51% - investor, 49% - author of the idea.
Both founders, by law, must themselves pay their contribution to the Criminal Code. Therefore, the investor gives the author a loan in the amount of his share (49% of the investment), which is signed by the corresponding loan agreement at 8% per annum.
Investments are transferred to the account of the enterprise, as necessary, as a contribution of the founders to the UK.
After 2 years, the author undertakes to pay the investor a loan in the amount of 49% of the authorized capital, and to redeem the investor's share at the price of 651% of the authorized capital, as a preliminary agreement on the sale of the share in the authorized capital is signed.
Any money received by the investor from the enterprise within 2 years is used to repay the loan, and then to the prepayment for the repayment of its share in the UK. ”
Apparently, the Great Combinator hopes that the author of the idea did not go to school and cannot read. And to calculate the economy of such a tempting offer, you will need a gravitsap, a shovel, and a separator with a tranculator. Well, we have them!
We take the requested 1,000,000 rubles and we get that absolutely in any scenario, we must return the money to the investor. Yes, and return in the following amount: 490,000 * (1 + 0.08) + 510,000 * (1 + 6.51) = 4,359,300. In other words, under the pretext of venture investments, we were offered a loan for 2 years at 436% (4 359 300/1 000 000). Or 218% per annum.
A sophisticated reader may ask me why you can’t get a bank loan less than ten times less? I am afraid of this, I do not know.
A fairy tale is a lie , yes, there is a hint in it
Friends, read carefully the documents that the investor gives you. For on paper everything turns out to be completely different than in words. I sincerely hope that the 20 invested startups were fiction and no one would have to fall into financial
PS I'm even at a loss where to put it? In Startups or My Business? Or is it better in "I resent" or "I am insane"?