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dallastiger55
LSU Fan
Jennings, LA
Member since Jan 2010
6737 posts

stupid rookie question for investing in private company

okay guys dont rip me too hard, i honestly dont know where to start on this.

went to tour a brewery a few weeks back and feel in love with it. its a small brewery thats grown 300% YoY. they told me they raised 1.5M by getting a bunch of small investors at 10k each vs large ones. if i put in 10k how would that work?


basically how would i see the return on that and when could i take it out? does this sound like a safe bet? would any legal stuff be required?


TheDiesel
LSU Fan
Houston via Baton Rouge
Member since Feb 2010
2508 posts

re: stupid rookie question for investing in private company
There was a thread started about this in the last week or so. Usually these companies will have contracts drawn up already that will state everything.

eta:

Here you go
This post was edited on 7/8 at 1:13 pm


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TheLankiestLawyer
Member since Jun 2013
1803 posts

re: stupid rookie question for investing in private company
You need to contact an attorney to make sure your interests are protected.


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SabiDojo
South Alabama Fan
Open to any suggestions.
Member since Nov 2010
52385 posts

re: stupid rookie question for investing in private company
Don't be a fool. Contact an attorney before you get any advice from an anonymous person on a message board.


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LSURussian
LSU Fan
Member since Feb 2005
85175 posts

re: stupid rookie question for investing in private company
quote:

went to tour a brewery a few weeks back and feel in love with it.

How long had you been sampling their product before you "fell in love with it"?


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kennypowers816
LSU Fan
Houston
Member since Jan 2010
2282 posts

re: stupid rookie question for investing in private company
The link was dead, but St. Arnold in Houston mentioned a private offering they were having a year or so ago in their newsletter. They had a few minimum requirements that looked something like this:

1 - Minimum $10K investment in intervals of 10K
2 - Must be a TX resident
3a - Minimum net worth of $1M
or
3b - Minimum Single Net Income of $150K or $300K filing jointly

Don't quote me on the numbers as its been a while and the link is no longer active so I can't check. I just remember that I didn't qualify and at the time, everyone who would qualify that I knew might be interested lived back in LA.


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foshizzle
LSU Fan
Washington DC metro
Member since Mar 2008
32127 posts

re: stupid rookie question for investing in private company
quote:

okay guys dont rip me too hard, i honestly dont know where to start on this.


Then I advise you not to do it.

Not that you can't make money doing it, you absolutely can. But if you don't fully understand what you are doing then at best it's rolling the dice on an illiquid investment you don't understand very well. At worst you are getting screwed.


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Poodlebrain
LSU Fan
Way Right of Rex
Member since Jan 2004
17564 posts

re: stupid rookie question for investing in private company
First, good management is essential to success unless you are just looking to get lucky. Don't bother considering investing unless you have confidence in the management of the venture.

The terms of the investment should be laid out in some sort of offering memorandum that you must understand. The memorandum should also contain management's forecasts of operating results for the business, and payouts to investors. Any investment you make will be documented to show your equity in the business or as a note if your investment is a loan, aka legal stuff. You will have to assess the risk involved by reviewing and analyzing management's projections and determining whether the projections are likely to be met.

If you are uncomfortable doing these things you can get assistance from attorneys, CPA's and/or financial planners. However, their services will not be cheap.



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Cold Cous Cous
LSU Fan
Member since Oct 2003
14116 posts

re: stupid rookie question for investing in private company
Let me just say that I have represented limited partners who got completely hosed in similar transactions. You will have no control over the company and, depending on the people running it, you may or may not be able to get any decent financial information or an accurate look at the books. It may be very difficult to figure out if your money is being used wisely, or if you are getting the profit shares you're theoretically entitled to. And, again depending on the attitude of the main partners, they may resent your attempts to stay informed as unwarranted interference. I would definitely not recommend this to a novice investor.


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Rockyn
LSU Fan
Tampa Bay
Member since Sep 2008
7229 posts

re: stupid rookie question for investing in private company
Potential liquidity issues and inability to exert any influence as a <1% owner? As a novice investor? Sounds great.

Advisory costs alone are going to make that small of an investment a waste of time and resources.
This post was edited on 7/9 at 3:54 pm


GregYoureMyBoyBlue
Georgia Fan
Member since Apr 2011
2766 posts

re: stupid rookie question for investing in private company
Ask for term sheet and post it on here. Then we can help.


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