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Micro-Investment

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Started 3 years ago by Tigertree
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Tigertree
771 N. High St.
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There has been a lot of buzz in Westgate about wanting a coffee shop. There is even talk of an "empty mug" campaign to attract one. I was thinking about pitching a plan where, say, 100 Westgate residents invest a really small amount of money, maybe 500 dollars each, to start one. Has anyone heard of other micro-investment strategies like this? No one is going to get rich off of it, or even make a real secondary income. I would say the goal would be to recoup your cost over a couple of years, maybe come out a couple hundred ahead, at best, but end up with the desired business that is supposed to launch other development. It wouldn't be run like a co-op. We would find an entrepreneur looking to open a coffee shop and be their funding source.
Any thoughts?

Posted 3 years ago #
mrblue1022

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I have been working with several companies try to pull off micro-investing and micro-lending strategies like this with mixed results. If you are serious about getting something started I would be more than happy to talk through the issues with you.

Posted 3 years ago #
Tigertree
771 N. High St.
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I am really interested. PM me with anything you don't want to share publicly, otherwise feel free to discuss here. I would love for other Westgaters on the forum to see and take part in the discussion as well.

Posted 3 years ago #
chaptal
West Side
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I honestly do not have anything close to $500 to invest, but would definitely support a coffee shop in the Westgate area.

Posted 3 years ago #
Tigertree
771 N. High St.
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Well, I don't know that it has to be 500 dollars. I think, if done right, 50,000 is a pretty liberal figure for start-up capital. We're not talking about the Short North after all, so space is pretty cheap. I would think if the equipment were purchased used, and all of the labor was done by the business owner or donated by west-gate residents. Ideally the owner would be from Westgate to keep as many dollars in the neighborhood as possible, but that wouldn't be a requirement.
I guess my life revolves around making small returns on a lot of small investments. I look at every delivery I take in as a new investment, rather than a piece of one (Tigertree) entity. So putting 500 dollars for this doesn't seem like a huge sum. We just need people willing to invest to look at it as an investment, rather than a donation. We are the bank, the business owner will get a statement of accounts just like I get from chase each month explaining principle and interest. The money will come back to us.
If anyone is reading this and thinking about opening a coffee shop, email me your business plan. I think this could have legs. If your planning on naming your shop "_______ Grounds". I am not interested...

Posted 3 years ago #
mrblue1022

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A realistic figure for a brick and morter startup is about $100K - $150K. The other thing you have to work out is the structure of the business not only because of federal regulations, but to make sure no one ends up feeling cheated out of the deal. There are more details that would need to be covered beyond what I could cover in an Internet forum, but if you want more information, PM me and we can talk.

Posted 3 years ago #
Tigertree
771 N. High St.
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Well, I will PM you separately but to make sure the conversation doesn't get too sidetracked I wanted to address a couple of things.
I own a brick and mortar currently that got started for WAY less than that, and in a neighborhood with some of the highest rents in the city. I am sure it will be complicated, but not impossible. I would think it would be like any other privately invested company. For sake of not getting to complicated we'll just assume we're going with 100 equal investors who get 100 equal shares. Only not in the coffee shop but in the investment company. That investment company, then a single entity, invests (as it's only investment) in a coffee shop. That coffee shop is given a loan from the investment company like they would from their bank. They pay back the loan each month and the money is equally distributed among the investors.

Posted 3 years ago #
mrblue1022

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When you have people who put money into an investment and passively wait for a return on their investment, the SEC usually defines that as a security offering. Security offerings are highly regulated and require expense and time to set up. Most people who try to start up a company with a micro-loan scheme run into the same problem. The added wrinkle of the investment company that makes a loan to the coffee shop could create more problems in terms of investment company regulations and being considered a tax shelter.
The best way is to find someone to start up the coffee shop. That person then creates the business, and can go to individuals in the community and negotiate peer-to-peer loans. Each person can then loan the amount of money they feel comfortable with, while negotiating individual terms (interest rate, repayment schedule, etc) they feel are fair.
If someone is interested in tackling the challenge I might be interested in partnering with someone to open the shop. Just PM and we can met up to discuss.

Posted 3 years ago #
foxforcefive
CBus
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Religious groups are successful with this type of development in 3rd world/developing companies all the time. It's sad that our society can't do things simply anymore. :roll:

Posted 3 years ago #
Tigertree
771 N. High St.
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Well, those groups usually give small loans to a lot of people. I want a lot of people to give a small loan to one person. I agree though, it shouldn't be so hard for a group of willing participants to give money to a willing recipient.

Posted 3 years ago #
Walker
The KLD / Downtown
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I think an issue you could potentially run into with a setup like this is having "too many chefs in the kitchen" so to speak. Some of the investors might be a bit more laid back than others, but I'm willing to bet you will probably get at least a dozen of those 100 investors wanting to have a strong say in how the ship is steered since it's their money at stake. They might not like the type of coffee brewed, or pricing structure, or the way the tables and chairs are laid out. Typically with customers, you can choose to address their concerns, or not, and if not they'll likely go somewhere else. But these people will probably be a lot more vocal since that have part ownership in the place.
Just a thought I had the other day... I'd hope it would be smooth sailing, but I'd probably plan for some way to iron out these types of conflicts.

Posted 3 years ago #
Tigertree
771 N. High St.
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I am concerned about that.
I will, as much as possible, make sure all of the willing participants understand they are one of many that are, technically, investing in an investment firm, or club and that it is inappropriate to speak with the owner about anything more than any other patron could. Suggestions are fine, but as an investor not owner. I think those 100 people feeling some semblance of ownership could make the place really successful though. I would guess most coffee shops don't have 100 (households of) regulars the first day they open their doors.
If the owner wants to give an investment discount or do something more hands on with us, that would be up to him/her.

Posted 3 years ago #
whopper jr
saint louis
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I've often been interested in these small investment start-ups myself. It's similar to kiva.org, but only a bit more of a monetary investment and in the US. It's money toward a potentially good venture, including risk and reward.
I'm not a neighbor, but this is how neighborhoods begin to grow; from the ground up.
If this comes to fruition, I'd like to know more.

Posted 3 years ago #
kessler
Georgian Heights
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whopper jr wrote
If this comes to fruition, I'd like to know more.
Agreed...

Posted 3 years ago #
Andrew Hall
Dennison Place (The Circles)
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There are options like The Point which has the avantage of not triggering until the critical mass is reached. Perhaps not the best vehicle for getting the whole investment needed to start a coffee shop, but this is something you can integrate into a proposal. For example, when you've got 100 "shares" committed, you can take whatever funds are committed to either a money person or a local coffee shop to demonstrate the viability of the operation. If you have 25% or so in capital to bring to the table from this, that will go a long way in today's credit market.
You can avoid Walker's very valid concerns by correctly incorporating. Structure whatever you want. Investment below a certain amount is a non-voting share, perhaps. Limit voting to specific things, not day to day ops. Or all shares entitle voting on a board which handles the matters, not the individuals. Mr Blue I am sure has better information, but I think you can seperate some of the functions of ops correctly to get the results w/o the hassles of a true co-op or a structured corporation.
A.

Posted 3 years ago #
Big_Ben

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Like Andrew mentioned your best bet is to incorporate and sell shares in the corporation. Depending on size of investment you either get to be on the "board" or not. The board just votes on certain things and appoints a manager for the business.
I had an idea for investment capital generation a while back that could be applied to this. In your case you rely on finding a large amount of locals that want the business there and will more than likely frequent the business. You could then presale gift cards. You would want to bill it as a "jump start card" or something and have materials explaining that you are generating capital by presaling the cards. You then sale them for 80-90% of face value. They are basically getting a 12-20% ROI in merchandise. Not sure if you could generate enough capital this way but it avoids having to deal with investment regulations or ownership issues.

Posted 3 years ago #
Tigertree
771 N. High St.
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I like the idea of the point but I think we'll run into problems of pledges being made and not fulfilled.
I am also looking a little more into the non-profit idea. I think if we are established for the purpose of community redevelopment, our investors could get the money back they put in. I think.
I have been speaking with a lot of people, mostly from my posts on the forum, that wish to be involved. If we get over the legal hurdles I think this has a good chance of happening. Call me Meltworks, but I am already trying to think what business should come next.

Posted 3 years ago #
Tigertree
771 N. High St.
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The gift card concept is smart. I like it, but I don't think I could talk enough people into it. I have only lived in the neighborhood for three weeks now, so I think if I go door to door selling gift cards to a coffee shop that isn't created yet it might come off as a little scammy.
The credit thing is one of the two accidental nuances that make me like the idea so much, Andrew. The first is that, of course, the 100 households that put their money in are going to be regulars on opening day. The other is that with the credit market drying up; shops that would have never considered Westgate before might see us as the only option to get their business off the ground.

Posted 3 years ago #
Andrew Hall
Dennison Place (The Circles)
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Tigertree wrote Call me Meltworks, but I am already trying to think what business should come next.
Bully for you!
A.

Posted 3 years ago #
kessler
Georgian Heights
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Maybe eventually your west side location.
you could incorporate the coffee shop and yours in 2 storefronts.
call it T. & Coffee or something. a "branch" off your clothing store extended into the coffee market.
Sorry about the pun! I couldn't resist. :oops:

Posted 3 years ago #