Ask not how much money you'll make from a speculative investment. Instead, ask how likely you are to lose your risk capital. Most investors will find better odds wagering their money in Las Vegas, Macao or Monte Carlo than being angel investors to private companies.

Private company speculation is far riskier than betting on stocks to appreciate in value. Your money will be in jeopardy for years. There's no liquidity in a private company speculation. You can't sell it to another investor! Worse still, if you don't meet your private company's expanding needs for risk capital, company is likely to fail. Angel investors should reflect on Uncle Remus' tale of Brer Rabbit and Tar Baby. The more you put into company, more "stuck" you become.

Even if your private company is profitable, you won't recover as much money as you would from stock speculation, because public shares almost always trade at a multiple of balance sheet value of company.

A Sensible Hedge

If you are considering risking your hard-earned money in a private company speculation, send us a copy of business plan for review. If we can't find anything seriously wrong with it, we won't charge you for review. If we can't suggest ways to reduce your risk, we won't charge you for review. You have nothing to lose in having us review business plan. We can usually save you loss of some or all of your risk capital. If you have invested your money and lost it, we may be able to suggest ways to recover part or all of it.

Public Company Private Placements

It isn't cheap. It isn't easy. The winners in rush for risk capital are CFOs (Chief Financial Officers) who understand how to play money game.

Private companies seek risk capital from American Venture Capital Firms (VCs) and wealthy individuals called Angel Investors. A 2003 study shows that U.S. Domestic company odds of raising money from Venture Capitalists are less than one business plan in ten thousand will be funded. The initial VC capitalization will be for less than one million dollars and Venture Capitalists will want at least half equity in funded private company. The estimate of odds of private non-American companies raising money here are less than one in twenty five thousand.

Costs

What does it cost to seek risk capital for a private company from American Venture Capital Firms? Our Contact Cost Model gives you a rough way to estimate direct costs of raising risk capital. Your firm will need to prepare, package and mail a business plan to prospective investors. A professionally written business plan should cost your company about $20,000. Assuming that you use First Class mail and not an overnight service within United States, your cost to mail your business plan will be at least $5 in printing, packaging and mailing for each business plan sent to a prospective investor.

You should follow up your business plan mailing with at least one phone call. That phone call will cost your company at least four dollars in salary paid to a professional telemarketer. If you could contact 10,000 Venture Capital Firms and Angel Investors your costs will be about $115,000 and your odds of success are about 50%. If you contact 5,000 potential investors, your costs are about $65,000. Your odds of success would be about 33%. There probably aren't 25,000 American Venture Capital Firms and Angel Investors willing to risk their money overseas. If you could find and contact 25,000 American Venture Capital Firms and Angel Investors, your costs will be about $287,500. Your odds of success would be about 50%.

Contact Cost Model

Using our Contact Cost Model approach, you can easily determine your fund raising costs and odds of potential success with whatever number of risk capital contacts that you make. If you spend money to contact enough investors, you'll find someone to risk money in your company. Often, costs of your search exceed risk capital raised by your company.