I have found it virtually impossible these days to find ‘angel’ investors, Venture Capitalists, and even EQUITY Crowdfunding platforms that want to invest in either: 1) ‘service’ type ventures (as opposed to ‘product’ based ones) 2), ‘low-tech’ &/or ventures that aren’t ‘hi-tech’ &/or cyber/internet related; 3) any type of ‘brick & mortar’ type ventures.
Questions
Why do so many ‘start up’ investors of all types want to invest in:1) ‘products’ as opposed to ‘service’ type ventures; 2) high-tech/internet ventures vs. ‘brick & mortar’ ones?
6 answers from the community
A· Nov 3, 2015
1) Service type startups - by that I guess you mean consulting teams - are hard to scale. The more businesses, the more you need to hire. And then once you get to a certain number you need layers of hierarchy - logistical nightmare. Though <em>some</em> investors invest in service companies but they're usually not your average VC.
2) Brick and Mortar - there ARE investors willing to fund them - just not your Silicon Valley VC. The VC's usually stay clear of them because it costs too much just to prove the concept - you need to spend a ton on equipment, rent etc before you see a penny.
I think you've been looking for money in the wrong places.
A· Nov 3, 2015
I don't think that's why investors avoid these businesses.
It's mostly because marginal profit on product businesses is much higher than service or retail business, which both have high operational expenses
A· Nov 12, 2015
We're 5 years in as a services biz. It's the low margin ( 23% for us-which we thought was decent) that turns off VCs. That said, we leveraged our services biz as a platform for software revenue and now interest is high. So you can straddle both worlds. In the end though, you just have to do what you're passionate about.
A· Nov 3, 2015
Venture Capitalists want a 10x or 100x return on their investment. Normal small businesses don't turn into billion dollar behemoths overnight. Product companies can and do. So that's why.
A· Nov 3, 2015
What type of service business is it?
A· Nov 17, 2015
Most investors a total fuck-tards who follow the herd of other fuck-tard investors.