Thought of a business that can make hundreds of millions, but would cost millions to start.

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Handicapper
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I have this idea for a peer to peer Venture Capital type company.
Let me explain.


There is a huge gap in the way a multi-national company gets started like a Walmart or AMAZON.com, and the type of business I want to help get started.

I want to start a peer to peer funding company that lets people from all around the nation fund small startup companies.

Im talking about real small mom and pop type startups.

Like a local 7eleven or a carwash.


This is how it would work:

It would be sort of like the peer to peer prosper.com or moneyclub.com except you would be bidding on owning a small piece of a business instead of getting returns on a loan.



Lets say Joe Blow wants to start a carwash in his local town that cost 2.5 million to start.

Joe Blow does not have the 2.5 million, nor does he have the 15% to put down for SBA loan or 20% for a standard bank loan.


He puts up a listing on my website with his business plan. He list all his research and tells everyone the cost, car count, margins etc... Basically he makes his case for his potential business.

He decides to sell 50% of his busiiness. So if it cost 2.5 million to start his listing will be for 50% of that or 1.25mill.

At that point a 30 day auction takes place just like prosper.com

Members of my website would have the option of buying $500 shares for part of Joe Blows car wash. How ever many shares each person decides to buy, thats how much of Joes carwash he would own.


When you bid on a business on my website you become a part owner of said company.

You will make profits off your money if the business is successful or lose your investment if it fails.

If Joe Blow ever decides to sell his business you would get whatever % you have invested in a check for the % of the sale price.

You could potentially get a paycheck every month for the rest of your life if the said business is a success.

You could also sell your shares of Joe Blows carwash to other members if you want out.

It basically works exactly like the stock market except its used to help help fund small business startups that are not nearly big enough to have an IPO on a stock exchange.

Or you could say this is like a Venture Capital firm that uses peer to peer lending to help the start ups instead of just a few rich people putting up huge chunks of money.


I could go into much more detail but thats the general idea.
What do you think about this?
 

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Handicapper
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As you can imagine it would cost me a fortune to start this company. I would need to hire an entire accounting firm to distribute funds every month to each investor. I would need an entire IT department and lots of office space. I would have to have a major national advertising push.

I would have to go the VC route with this. I would say this would cost 20million at the very least to start.
I dont even know where to begin to get this thing rolling.
 
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Problem I see is that over half of all small businesses fail in first 5 years. I think finding the investors would be very hard to do.
 

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Problem I see is that over half of all small businesses fail in first 5 years. I think finding the investors would be very hard to do.

Yes but thats the great thing about this.
You dont have to invest your entire life savings on one investment.

You can make $500 investments over dozens of companies to spread your risk.

You are correct, over 50% fail but if you only hit 50% winners you will make a ton of money longterm.

Remember, you are not giving this person a loan. You are buying a piece of his business that you will own forever.
As long as the company you invest in stays in business and makes a profit you get a check till the day he sales the company which you will get a percent of that money, or until he closes the business.

So if you invest $500 in 10 different businesses and 5 of those 10 fail you lose $2500

But with the other 5 that are successful you will quickly offset the $2500 in loses you lost in the other 5 businesses.
 
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Chop- I dont like to shit on anyones idea, but I see real problems with the investors. First as I stated more fail than make it and then secondly, it is too easy for the person who runs the business to not be honest and cook the books. I have been a "silent" investor in 3 businesses and they never really worked out as it was originally pitched to me. And this was from some of my best friends in the world and people I trust. I did end up making money on our carwash that we owned in Tampa, but if it was not for me taking a much more proactive hands on approach, that to would have wasted away to nothing I am sure.
 

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ACE, the owner of the company would have to use the accounting service of my company in order for my peer to peer company to invest in you.

Its the same criteria that a large VC company requires when they invest in a company.

There would be real strict rules in order to get funded by my company.

I have safeguards for everything you just mentioned.

I would require the accounting to be done in the same why that a companyy has to it for any other VC firm.

Basically this is a peer to peer VC company that pools money together with hundreds of small investors instead of just a few rich large investors.


And like I said previously, you dont need to be right 50% of the time so it dont matter of over 50% of small businesses fail.

You lose money once on a failed investment.
You make money forever on a successful business.

One winner will offset 5 losers.
 

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As far as I understand you also just cant sell shares to the public without the SEC getting all up in your face ... I believe there are rules regarding the issuance of private company shares to the public ... this may be an issue for you
 

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As far as I understand you also just cant sell shares to the public without the SEC getting all up in your face ... I believe there are rules regarding the issuance of private company shares to the public ... this may be an issue for you

I used the word share as a term only.

It would be the same as me selling you 10% of a company I own.
The SEC would have nothing to do with this.
 
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You're asking a lot of people to Trust you. and a lot people to Trust the person or persons that Open up that business....and Who's to say that the person that starts this business doesn't make it tank.

the business is only as good as the person behind it.

I just don't see this working out, just like prosper.com failed.
 

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Why would the business owner want to make the business tank?
He would have more to gain then anyone.


Of course there are going to be failed business. Why does everyone think that every business has to work in order for my idea to work?

And prosper.com did not fail.
It is doing quite well right now, and so is lendingclub.

Not saying he would do it, but some people will Give up if things don't thing too good.
There are people that think it will start off with a bang. Once they see some Trouble, they Bail.

as far as Prosper... I remember them having trouble a couple of years back. I stopped following
so didn't know they bounced back.
 

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Chop, you're missing the point. You know how many "wannabe" business owners there are out there?

You can't compete with prosper. And they do not specialize in small business loans as your idea will.

There are far safer things to invest your money in other than a start up business
 

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BAS, prosper is trucking along. They had to work some kinks out, but are doing pretty good from what I can see now
 
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Why would the business owner want to make the business tank?
He would have more to gain then anyone.


Of course there are going to be failed business. Why does everyone think that every business has to work in order for my idea to work?

And prosper.com did not fail.
It is doing quite well right now, and so is lendingclub.

Not saying he would do it, but some people will Give up if things don't thing too good.
There are people that think it will start off with a bang. Once they see some Trouble, they Bail.

as far as Prosper... I remember them having trouble a couple of years back. I stopped following
so didn't know they bounced back.


again, some People would Walk away. It has Happened , I've seen it.
 

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Handicapper
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Half of this post is not mine. Did someone hack into my account or something?


Why would the business owner want to make the business tank?
He would have more to gain then anyone.


Of course there are going to be failed business. Why does everyone think that every business has to work in order for my idea to work?

And prosper.com did not fail.
It is doing quite well right now, and so is lendingclub.

Not saying he would do it, but some people will Give up if things don't thing too good.
There are people that think it will start off with a bang. Once they see some Trouble, they Bail.

as far as Prosper... I remember them having trouble a couple of years back. I stopped following
so didn't know they bounced back.
 
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BAS, prosper is trucking along. They had to work some kinks out, but are doing pretty good from what I can see now


Ok, good to hear.
I was a member ( guess I still am, since I still get email's from them )
But I haven't given out any Money in the past 2+ years
 

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Handicapper
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again, some People would Walk away. It has Happened , I've seen it.

does not matter.

If a bank had the same mindset there would be no such thing as a small business.
 

Home of the Cincinnati Criminals.
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BAS, I agreee, I use to be. I had 2 one A+ other a D go bankrupt on my. I will never invest again, but borrowing you can get some good rates
 

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