Tuesday, November 16, 2004

The 10% solution

Since the economy is so lousy in Rockford and our biggest high tech employer (Sundstrand Aerospace) is leaving town, I have been spending my spare time designing products. Energy savers mostly.

A flashlight. Some automotive stuff. Power grid stuff. Military vehicle stuff. Telco stuff. I've had it looked over by other engineers. I've had the preliminary business plans looked over by investment bankers. And what it comes down to is this. It seems like there are no risk takers left in America.

Every one I have talked to said the plans had merit. The market was there. Patents are possible. Manufacturing processes were all standard. Time to market varied from three to nine months. Several project go/no go points were suggested in order to limit the risk.

So what is the problem? The problem is the 10% solution. In this market what investors want is to make a "guarenteed" 10% on their money. In a word, real estate. The kind of deals I am suggesting are the double or nothing kind. If the projects fail there is no residual value.

Now if it is happening to me it must be happening to many others as well.

So what I want to know: any ideas for solutions?

Given the amount of money spent on political campaigns where there is no residual value (possibly even further losses) if you are on the losing side, it would seem that there ought to be resources out there for this kind of venture.

Well if you know of any, you know where to reach me.


David Foster said...

Maybe you've already gone down this road, but...generally, high-risk investments are initially funded by "angels" and then VC firms kick in for later rounds. In some places there are organizations of angels that listen to presentations by aspiring entrepreneurs. Is there anyone like that in your neck of the woods?


M. Simon said...


As far as I have been able to determine there are no angel investor groups in Rockford, Illinois.

Anonymous said...

You've been Sampled...Z

Jeff Faria said...

OK, there are no angel investors in Rockford. So, why aren't you paying calls in places where there ARE such investors, such as (but not limited to) Silicon Valley?

It's all about marketing, and it starts as soon as you get the idea.

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TonyGuitar said...

Electric Vehicle. Automobile or 2 wheel scooter / motorcycle.

Millions of bicycle riders in Asia Africa and Europe will gladly move up to an battery operated scooter. As long as they can plug it in at work or at some building to re-charge.

The electric vehicle is the next big wave. Anyone who can connect should enjoy a good, long term ride, in every sense.

Big box stores like Costco allready offer plug-in re-charge
to their customers. Mostly for seniors and their four wheel transport.


for links to Tesla Roadster and GM EV-1. = TG

Da Bear said...

Sand Hill Road....is the Mother Lode of VC....You need a businees plan and you will be amazed at the opportunities.

These folks wake up each morning begging for good ideas to come through their door.....If you have the will and a good idea (not even a great idea) , they have the $$$$ and the connections.


Da Bear

M. Simon said...

da bear,

What the sand hill folks want is a management team.

They would rather have a second rate idea with a first rate team, than a first rate idea with a second rate team.

Unfortunately they are right. I do engineering. However, it is the sales and marketing plan that is most important. Sigh.

Also some of my ideas though highly profitable take too little capital to start up. A $ million is usually the minimum. I have several ides in the $200k range. $100K for engineering and initial production. $100K for marketing/sales.

Anonymous said...

Ideas are cheap, big companies look at them all the time.

If you want to get around that you have to show commitment to your ideas.

Did you take out patents, design rights etc.

Have you build and tested the prototypes, or even a preproduction run?

All essential if you want to attract somebody else to invest.

They want safety (patents) and proven design.

They will want a good slice of the profits.

Only then they will evaluate production cost and marketability.

Many ideas fail along the long path.