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v. April 27, 2017
Most private investors have lost significant amounts when trusting in banks,
financial consultants, financial markets. A major part of private small investors has lost most of the retirement savings. There is something wrong in the world of money. Basic moral values, did they disappear? Earnings are low, losses are high.
Should you better return to investment opportunities based on personal reliability? ... fin7.com
The risk is rather limited if you observe some basic rules. The possible earnings are much higher than typical traditional investment opportunities for small investors.
In addition, you get the exceptional experience to see small businesses start and grow due to your money. If you have some corresponding professional knowledge, you might assist the business to become successful.
The problem of the duplicate risk in case of innovation.
A normal new business is for a generalized business concept, like a local shop. This has one single risk factor group to master: Will there be a commercial success - like for the many other such shops. Experienced average bank employees would be able to guess relatively reliably the future of such a business. Normal bank loans might be possible.
The priority on fin7.com is for new businesses with some innovation effect and related to current and future new markets.
In this case there is a second group of risk factors: Will the world have a profit making demand for the new concept? - The duplicate risk analysis is the task of the investor.
The major success aspect of the duplicate risk is:
If an innovative business has success, there will normally be no competitors for a longer period. So there is a chance of rapid growth. Many current huge companies worldwide started in this manner. It is the special advantage of the first player in business. The initial investors can this way double or triple their money within might be 4 years. This is the recommended agreement clause when financing a business on fin7.com .
Investors should understand that all investments in startup opportunities are risky and illiquid. fin7.com does not advise any of its members to participate in a particular investment opportunity. A loss of a member’s entire investment is possible with any investment opportunity.
Investors should never invest a major part of their funds or their savings into this kind of opportunities.
German language specifics:
"start-up" is mainly used in the sense of new innovative businesses, hence with the duplicate risk type. "Gründung" (founding) is the general term for creating a new business.
Annual interest rates between 6 and 12 %
are the traditional interest rates for loans by private investors for small businesses. If the inflation rate and the general bank interest rates are high, these value might increase correspondingly.
Some other good general rule is to be 6 % above the inflation rate and at the same time at least 3 % above the interest rate of reliable banks for savings. This is for business investments with some risk involved.
Mainly loans to small businesses
are the domain for which most banks have lost the knowledge how to evaluate and how to finance them. If innovation and technology add to the evaluation problem, business founders do not need to loose their time by trying to get money form normal banks. (Rare exceptions confirm this general rule.) - So this is the reason why you as a private investor might earn far more money from small businesses than from most other investment opportunities.
In case of a mortgage private to private
the private investor can not obtain much more than a bank would get. The access to mortgages is typically not much affected by access problems.
But there are some categories for which the organized mortgage market does not work properly. This varies between the countries. In many countries mortgages for aged persons are difficult to obtain even if there is no risk involved. In many countries mortgages are difficult to obtain for persons without a constant monthly salary even if they always and perfectly fulfilled their financial obligations and if there is no risk involved. This creates a market for mortgages private to private with a risk close to zero for your money. Your earnings as a lender will not be excessive but will be far above the interest rate of most other reliable investment opportunities for small investors.
How to earn money from a company which still looses money?
Growing companies can frequently avoid in a legal manner to pay taxes on profits. This is the reason why agreements might include payments to the investor even if the company shows losses in its tax declaration. There are various agreement forms to cover this frequent case.
Fair "exit" agreements.
A fast growing technology company will perhaps one day become attractive for institutional investors. There should be a clause how to make the initial investor leave the company. This clause should include a rule how to give the initial investor a fair part from the success. A fair agreement might be that the shares can be bought back for the triple of the amount paid by the investor. If already after less then 3 years, the increase might be limited to duplication.
First of all, forget about the venture capital hype.
For example, for Germany these years, only 4 percent of innovative technology businesses were accompanied by some professional venture capital lender.
Second: One of the best ways to loose your money is to give it to a venture capital company. There are not many successful exceptions from this general rule.
The usual success hype in the printed and Internet media for venture capital companies is mostly to find fresh money after having burnt and lost the money received in the past. If venture capital businesses would be as successful as they claim, they would not talk about it but silently continue to multiply every year their own funds.
The reason of the bad state of most of the venture capital industry is that most venture capital companies are managed by financial experts and not by experts how to manage innovation or a technology business.
In this case, the subject is speculation and not the role like a bank. Whenever a financial crisis reduces the staff of hired invest bankers for speculation on the financial markets, it begins a temporary proliferation of new venture capital companies.
Their owners, hence past speculative invest bankers, typically succeed to collect funds based on past personal relationships. They try superficial gambling speculation in technology innovation markets. This is typically he only role for which they are experts. They typically loose the funds on these difficult markets and close a short time later after having burnt the money.
The main speculation is the later "exit" by selling the company.
Buyers are typically the managers of bigger companies. They frequently tend to pay huge amounts in order to demonstrate their personal power and their genius to understand the future and everything. A short time later they might state that it was an error and that they paid far far too much. This is not an exception but a very typical sequence of events.
This type of venture capital success is a speculation based on the stupidity factor of managers of big business. This game mostly fails. Only some 10 or 20 or so experts of this strategy are permanently among the winners. You as a small investor, you have no chance to participate in this game based on the big business stupdity factor. At least 10 or 20 million US$ or EURO per game would be required.
Your advantage as a small investor: Your intelligence.
Typically you as a small investor have a far better knowledge in your field of professional experience. So your investment decisions will typically be far better than those of most venture capital company managers. This is under the condition that you as a small investor will try to finance only businesses for activities which are part of your personal professional experience.
So your first advantage is that you can judge the subject and the success probability of your possible investment. You do not depend from expert opinions. Experts survive financially by earning money from supplying frequently kind opinions. Nothing like this can compete with your own professional knowledge of your field of personal professional activity.
Your further advantage as a small investor is to trust in humans and not in business plans.
Business plans can be manipulated without any serious limit. Humans can be judged.
Automatic scoring evaluation based on business plans sounds convincing but is nonsense. The abstract theory of economics has proven the nonsense reason: A statistical result will always be just a mirror of the initial data input. If this data input can be manipulated in an arbitrary manner - like business plans - , the calculated scoring results are of no value.
Business plan evaluation is useful as a rapid think model. It is nonsense when considered as a base for scoring and for investment decisions.
The major purpose of business plan evaluation is to finance the salaries of more than 100 000 persons worldwide and to give them the feeling to do something very important with the hours of their life. It is psychology, sociology and imagination which governs the post-industrial habit of creating pseudo labor, my friend.
Be glad to be more intelligent. Be glad not to trust in business plans but in human qualification.
Carefully check the professional background of those who want to get your money. Be aware that the average age of successful founders of innovative technology businesses is approximately 40 years (so an analysis for Germany, but probably valid worldwide). Stay away from financing students if there are not very valid reasons for doing do.
Forget about the media news with photos of nice young guys, combined with their company logo. This ridiculous stereotype is for the media hype. Frequently these are just marionettes for the true experts managing the activity in the background. Frequently these "owners" only possess less than 10 percent of the company shares.
Close to everything in the markets of reliable new technology innovation businesses is based on experts with 10 or more years of experience and with a profound knowledge level. Never forget that the average age is 40 years in the case of successful business founders in fields like Internet, computing, software, communication technology.
It is not recommended for fin7.com to try to find companies agreeing in this. Typically it will not work.
In the rare case that business owners agree with corresponding contract rules: Perhaps they have no intensive relationship with their project or they lack professional experience. If somebody considers his business as a game, then it does not matter to lend a major part of the success to somebody else. But how much can you trust into the business success of somebody who interprets your investment as a part of a speculation game?
So if a business owner wants to limit the investors to something like tripling their investments, this is not so bad. He believes in his "chield". Therefore he does not want somebody else to make excessive profits from his work.
The site fin7.com is mainly for technology and innovation.
In many countries there are public subsidy programs for such innovative technology activities, like in some European countries.
These organizations distribute a lot of marketing about their helpful activity. This marketing is required as an image strategy to finance the organization and its employees from taxpayers money. Whether this marketing tells the truth, this is a very different aspect.
So far not a single such organization could be detected throughout Europe which does what seems to be promised and what is expected. In frequent (most?) cases these organizations are surrounded by professional subsidy hunters who take care that money is burned properly and with reciprocal benefits.
Why serious applicants risk to be refused.
Honest qualified experienced business owners or business founders of technology businesses, they just want money. They hate subsidy hunters because these people hinder free quality competition for financial resources. Such owners refuse to be obliged by the subsidy organization to loose company shares for this type of "helpful partners".
So such top quality applicants would be a risk factor for this peaceful balanced reciprocal cooperation of public money burners.
As soon as a subsidy organization requires a "side investor", a bank participation, business plans signed by consultants or whatever, there is a hidden problem. The result will be a tendency never to finance applications of honest independent standalone entrepreneurs with innovative technology projects.
Where is the subsidy organization which does not apply such or other strange access conditions?
On the other hand, the many refused applications are very useful for this system. A high refusal quote between 60 % and even 90 %, this pretends to supply the proof of careful selection. For example, if 90 % are refused, then nobody cares if the remaining 10 % might frequently end up in the environment of a small number of professional subsidy hunters..
So if an innovative technology business with experienced qualified persons behind the concept did not succeed to get money from public technology and innovation organizations, you should consider this as a first proof that it might be an investment of top value. Somebody who refuses for example organized theft of major parts of the results of his intelligence and engagement, demonstrates basic entrepreneurship qualification.
A special case group: Corruption.
In the special case that some organizations might even require to submit a subsidy application to corruption networks, in this exceptional case is the "no" even more a proof that the business owner is able to survive future typical business life problems. If somebody is able to understand how corruption networks are dissimulated, and if he decides to stay away from this, he also supplies some additional proof to be capable to manage a business with success. You can probably trust in somebody who refuses to trust in corruption.
This does not mean that most or all public subsidy distribution includes corruption. Whenever true corruption analysis has been attempted for public subsidy distribution, the quote of successful corruption proof did rarely exceed a level between 5 and 30 % of the distributed subsidies. (Read the OLAF results about subsidy corruption in the EU.)
When seeking money on fin7.com , business owners and founders are invited to list all refusals of public money and the stated reasons. Such refusals might be considered as an argument in favor of the project quality.
The best reason so far ever heard was from the EU Commission: Refused because the financial planning did not use the Microsoft software Excel. Somebody who offers 1000 Euro, will get this written original document of top collector value. It is an absolutely unique document how public funding can turn into organized madness.
This proof of madness belongs to the reasons why finally fin7.com has been completed: The return of "Private to Private", if governments have lost the relationship to the reality of their working citizens.
We should all be curious about other strange reasons why public subsidies have not been granted. Perhaps there will even be refusal reasons which might top the extreme example mentioned here above.
If everything fails in this world in this field - most governments, most banks, most organized investors - , then the time has come to return to trusted financial relationships private to private: fin7.com .
Please take part as an investor on fin7.com .
Public subsidizing organizations which think to be far better than most others, please send a message
to ok @ fin7.com . If there are enough organizations doing in the future the job for which they are financed by the tax payer, fin7.com could be closed. There is enough public money distributed for innovation and technology in most countries worldwide. The only problem is that most of this money leaves the public tax payer budgets but never arrives where it should arrive.
The last sentence is the personal opinion of the author of these lines. There is no pretension to declare it as an absolute truth. Everybody has the right to share this opinion or not to share it.
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