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Please help me check my theory about looking for investment capital

Discussion in 'Development' started by Mario Llige, 29th Apr, 2016.

  1. Mario Llige

    Mario Llige Member

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    I believe that developers who look for investment capital need a bigger pool of investors to call upon. They currently spend a lot of time and money trying to attract more investors to each project. To overcome this, I suggest promoting their projects to a huge database of compatible investors.
    1. Do you agree with my assumption about developers needing a bigger pool of investors?
    2. Do you agree that they spend a lot of time and money looking for investors?
    3. Will promoting their projects to a huge database of investors be helpful?
     
  2. hpresident

    hpresident Well-Known Member

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    Is this a startup/app idea?
    As a small time developer, the answer can be yes in all three questions. Saying that it is important to have a personal relationship with the investors especially if individual guarantee is required.
     
  3. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    Not all developers make good investment partners. I regularly see failed deadlines, requests for more cash and stalled projects due to a range of issues. Good developers generally have sound funding channels and smash one after the other.

    There are substantial ASIC issues to address as the investor numbers increase.
     
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  4. Mario Llige

    Mario Llige Member

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    Yes, @hpresident . I'm toying with the idea of a startup, so I want to make sure that my idea has legs to stand on. Thanks for answering.

    By "individual guarantee" do you mean that the developer legally guarantees a positive outcome in a contract?
     
  5. Mario Llige

    Mario Llige Member

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    Thanks for your answer, @Paul. That's pretty much what I've discovered by talking to many investors. The big issue is their trust in the developer's competency.

    I've spoken to a few fairly large developers too though, ones that have completed many projects successfully. They have existing investors in their networks, but they want access to more. Can you point me to somewhere that explains how to do a thorough due diligence on a developer?
     
  6. Marg4000

    Marg4000 Well-Known Member

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    Obviously you plan to charge for your services.
    What guarantees can you offer investors who rely on your company for advice? What are you offering that is not already available through solicitors private finance arrangements?
    Have you considered the risks of dealing with developers who cannot raise finance through existing channels?
    Will you need a prospectus for each project?

    If you are considered to be offering financial advice you will probably need formal qualifications.

    Another question to ask yourself - what are you offering that will make your fees good value?
    Marg
     
  7. Mario Llige

    Mario Llige Member

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    @Marg4000

    Thanks for your penetrating questions, Marg4000. I need more of these! Right now, I'm only checking the viability of such a venture, and I'm not offering any services/products. Your questions give me an insight about your concerns, and I'm sure they reflect other people's concerns.

    If I ever come up with a solution, there will be a charge. I don't see it being in the financial advisory field at this stage, though, so the question of a guarantee doesn't apply. And although I'm not looking at providing finance, I'm curious about solicitors providing finance arrangements. I plead complete ignorance about this; I didn't even know they do that. How does this work?

    As for the risk of dealing with developers who can't raise enough finance; I'm looking for ways to vet shonky ones, but still give legitimate ones the opportunity to promote their projects. Many times, a project may come up, but the network of investors that a developer has access to is limited. The investors' money might be tied up in other projects, so the developer has a need to expand its base of investors in order to get their next project moving.

    I would make it a requirement that the developer provide a Prospectus / Information Memorandum along with other ways to prove their integrity and capabilities. I'd also be looking at their track record, and the background of the director(s).

    I can't comment on the fees, because I'm not offering any product/service yet. Whatever they end up being, I'm aiming them to be less than what either party (investor or developer) currently spend (in terms of time and money).

    I'd appreciate it if you'd let me know... What would you do to assuage your concerns about the integrity and capability of a developer?
     
  8. MTR

    MTR Well-Known Member Premium Member

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    Paul
    only need to read the thread on PC regarding EOS armchair developer, what a disaster.

    The moral of the story be very careful who you go to bed with. This group had no track record whatsoever, yet investors throwing money at them. This company continues sourcing sites and clients jumping in while all they have achieved is losses for their clients, totally unbelievable.

    MTR
     
  9. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    Consider talking to RPI in Qld. He is a lawyer who sets up managed investment schemes. ASIC and licensing will be the first obstacle and cost the other.
     
  10. Mario Llige

    Mario Llige Member

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    @MTR - What's the best way to do a thorough due diligence on a developer? Are there ways they can hide their poor performance or dishonesty?
     
  11. MTR

    MTR Well-Known Member Premium Member

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    I have never gone down this road, I am a small developer and do my own projects.

    If I was to go down this road I would start off by looking at the company, years in business, projects completed, ASIC director search, projected profits on past and future projects, are they doing everything in house, client referrals, what they build, quality of the builds, where are they developing, rate the risk of their project/product, and most important where is the property cycle at where they are building, is there a demand.

    Personally I just would not touch anything at all unless I understood the market they were playing in and demand.



    MTR:)
     
  12. Mario Llige

    Mario Llige Member

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    Thanks for that @MTR . I'm just reading the EOS armchair developer thread to get a better idea of the problems. I'm gathering as much data as I can as a springboard for my eventual product. Looks like it's going to be a long slog!