Board logo

Can LB help me raise £50k?
ChrisW - 13/8/12 at 07:31 PM

Well, I've asked some things on LB before, but this is perhaps my most audacious. Here goes...

I'm currently on the hunt for investment capital in my next business venture, having sold both my ISP (Netrino) and TVCatchup.com a few years back. I've been an employee for a while which has been nice, but the time has come to move on to the next big thing and go back to being a startup again.

Normally at this point I would be bashing my list of contacts, working the various investors clubs, and all those other things to get attention, but then it struck me that I have a captive audience right here who all (hopefully) know who I am and (even more hopefully perhaps!) have at least a little bit of trust in me. Some of you have even had the privilege of meeting me! OK, we might not be regular investors, but I'm not exactly looking for 'regular investor' sums of money here.

I guess it's one of those 'no harm in trying' situations, so here goes!

The plan is to put together a new data centre aimed at the cheaper end of the market. For those that don't know what that is, try http://en.wikipedia.org/wiki/Data_center. Now, a 'normal' facility would typically cost £1m upwards to build a fairly modestly sized site but I've come up with a new concept that allows a facility suited to this market to be built at a fraction of the cost of traditional methods, and due to another couple of coincidences I'm in a position to move forward with this with a huge saving on the two key and most expensive elements of a build; the provision of power (and lots of it) and of ultra-high speed connectivity.

The reason for heading for the lower end of the market is that it was a product that I was asked for on a regular basis when I was running Netrino. I won't give too much away here other than I'm convinced that not only is there a big gap in the market, but also that nobody else in the UK and possibly even the world has thought of solving the problem in this way. I've certainly not been able to find anyone else offering a similar service.

In order to do this I need to raise around £50k startup capital to buy equipment and fit out the building. For this investment I'm looking to offer 25% equity of the company. Now I'm sure that not many of us have that kind of money going spare so I'm expecting to split the opportunity, but in order to keep the numbers to a sane level I suggest the minimum investment is £4000 which would get you 2%.

I've got a business plan with a full set of numbers, but I'll keep it simple here. The headline figures are that you should make 150% of your investment back by the end of year 3, and a further 50% every year thereafter. In other words, if you put £10k in you would expect to have taken £15k out in dividends by the end of year 3 and a further £5k dividend each year following that.

Obviously there is a whole lot more but I won't go into too much detail here. If this is something you think you would be interested in I guess the best thing to do would be to drop me an email (don't u2u in this case). Use the email button at the bottom of the post - it's the @locostbuilders.co.uk one - and we can go into some more detail. I don't mind answering basic questions here but, being a new concept that's not been done before I don't want to give too put too many details on a public website for obvious reasons.

Anyway, thanks for reading. Hopefully I'll hear from a couple of you, otherwise it's back to the shiney shoes and the investors presentations for me!

Cheers, Chris

TimC - 13/8/12 at 08:02 PM

Wrong timing for me but I can put you in touch with someone if you wish?

theconrodkid - 13/8/12 at 08:20 PM

YHM and ill look down the back of the sofa

ChrisW - 13/8/12 at 08:22 PM

quote:
Originally posted by TimC
Wrong timing for me but I can put you in touch with someone if you wish?


By all means, Tim. As I mentioned, I'll be doing the investor clubs looking for introductions so if you can introduce someone I'd be more than happy.

Chris

Neville Jones - 14/8/12 at 09:36 AM

If the idea is unique, get it protected by patent/registered design or whatever, before you go any further or utter another word.

The yanks and chinese,(and the english/europeans if it comes to it) will be using your IP before you know it, and not paying a penny for it.

Cheers,
Nev.

ChrisW - 14/8/12 at 09:58 AM

Hi Nev

Indeed, I've already thought about that and unfortunately I don't think it's significantly different enough to be able to get a patent. I do know a patent lawyer and keep meaning to set up some time with him, but I'm pretty sure I know the answer already.

To be honest, I think it inevitable that the concept will be copied and my plan is simply to be first to market and create a buzz about being the 'inventors' of the concept - I'm sure there is plenty of marketing spin that could be based on that. The beauty of the idea is that to go with my new design concept the rest of the building has to be designed around it in order to make the kind of savings required to hit the price point I'm aiming for. Much as this may sound like a disadvantage it's actually the opposite, purely because any existing facility who tries to copy me would either have to suck up a huge cost overhead or build/rebuild a new site just to offer this facility.

Also consider that I'm aiming for the entry level user and I suspect that this will already exclude most of the big providers from trying to go the same route purely because the margins are not high enough. If (or rather 'when' competition arrives I suspect it will be from another startup company or possibly a small, already established company that has opened a new facility dedicated to this concept. In actual fact, with anything new, a little competition is possibly an advantage as long as there is reasonable geographical separation. People don't like change, and this is definitely a case of a departure from tradition. What could be more convincing than one company harping on about how much better this new concept is but two?

Cheers, Chris

SeanStone - 14/8/12 at 01:59 PM

Are bank loans not an option for this sort of thing?

MakeEverything - 14/8/12 at 02:03 PM

Its not a unique idea.

Ive worked in and around Data Centres and critical environmens for the last 10 years. Lots of the big banks etc have their own data centres, BCP sites and disaster recovery programmes, but they arent your target market anyway.

The other data centres that offer services such as those you describe are large affairs, but cater for the 'data suite' market as well as the 'single 48u rack' market within co-located space.

Issues to consider (and im sure you already know this) is electrical power and cooling, as well as the obvious security, unpacking areas, waste management, cabling / infrastructure etc etc. I held a senior position at a large docklands data centre once, and the physical infrastructure there was immense, and was notably the largest data centre and private high voltage (11kV) network in europe at the time. With an industrial unit sized co-locating space, you would need the same size unit for all of the plant and equipment to run it. That is of course, assuming you have a location that is capable of supporting the electrical loads that youre looking at, and will permit you to have chillers, condensers or other heat rejection plant retro-fitted as these are now subject to part L of the building regulations, let alone planning consent for noise / vibration issues.

Some examples of companies already offering that service to smaller clients;

Global Switch
Telecity RedBus
rackspace.co.uk

...to name just three major competitors.

Since i now work in the government sector (for a private sector firm), ive let my uptime institute and energy institute memberships lapse but we do still work in a lot of 'critical environments' that demand the same resilience and protocol as your average hi-spec data centre.

Not wanting to wee on your chips, but ive looked at this already.

[Edited on 14-8-12 by MakeEverything]

ChrisW - 14/8/12 at 02:08 PM

quote:
Originally posted by SeanStone
Are bank loans not an option for this sort of thing?


They are indeed, but they're an expensive way to obtain money. Also investors at this level may be put off if part of the plan involves borrowing money in case they could in some way be held liable. At the end of the day I have to weigh up the options of interest payments but owning the whole company vs no interest payments but giving away some equity, and that will really come down to how much interest I get from investors.

ChrisW - 14/8/12 at 02:12 PM

quote:
Originally posted by MakeEverything
Its not a unique idea.....


Erm... I don't believe I've actually mentioned what the unique part of the idea is yet, so how do you know whether it's unique or not?

Keep in mind I've spent the last 10 years buying up wholesale data centre space from at least two of the companies you mention and among plenty of others. A big part of my business income came from subdividing and reselling this space to smaller users. After 10 years of doing it I'd like to think I've got a pretty good idea of what people are looking for, what products are in the market already, and how best to fill the gaps.

quote:
Originally posted by MakeEverything
Not wanting to wee on your chips, but ive looked at this already.


Looks like you're doing your best, regardless of whether you want to or not. If you're going to jump to conclusions please keep them to yourself.

Chris

Rod Ends - 14/8/12 at 05:23 PM

Have you seen this? Lots of people investing smallish amounts of money in new projects.

ChrisW - 14/8/12 at 05:24 PM

Oh yes, kickstarter is great. Problem for this project is that I need to protect the idea as much as possible. The minute I put it on kickstarter there will 100 copy-cat projects!

Chris

Ninehigh - 14/8/12 at 07:05 PM

I'd love to be in, but £4k is way over my budget. Come to think of it £400 would be a stretch!

MakeEverything - 14/8/12 at 10:28 PM

quote:
Originally posted by ChrisW
quote:
Originally posted by MakeEverything
Its not a unique idea.....


Erm... I don't believe I've actually mentioned what the unique part of the idea is yet, so how do you know whether it's unique or not?

Keep in mind I've spent the last 10 years buying up wholesale data centre space from at least two of the companies you mention and among plenty of others. A big part of my business income came from subdividing and reselling this space to smaller users. After 10 years of doing it I'd like to think I've got a pretty good idea of what people are looking for, what products are in the market already, and how best to fill the gaps.

quote:
Originally posted by MakeEverything
Not wanting to wee on your chips, but ive looked at this already.


Looks like you're doing your best, regardless of whether you want to or not. If you're going to jump to conclusions please keep them to yourself.

Chris


Hang on a minute, i read your post as wanting to rent out co-located data space, and was offering some help and experience;

quote:
The plan is to put together a new data centre aimed at the cheaper end of the market
.

I wasnt jumping to conclusions at all, rather commenting from the information you had written. Nice attitude you have there Chris, and an insight to any would be investor.

[Edited on 14-8-12 by MakeEverything]

Mr C - 15/8/12 at 12:11 PM

Another case of not knowing the full story and judging. Chris has the right attitude as far as investors are concerned, particularly protecting his idea on an open forum. I wouldn't jump to any conclusions without knowing the full facts which are clearly not fully disclosed in this thread for obvious reasons. I also have the intelligence not to ask sensitive questions about the proposal on an open forum also.

Lastly if I was criticised rightly or wrongly for a previous comment wouldn't respond in this way or indeed post up in another thread my dissatisfaction in the way the forum has been used to tout for business. (quoted below)

"That said, i don't think (or expect) the LCB forum to support anyones business, as it is neutral ground for discussion, not a marketing board for small businesses or IT ventures."

If you were that concerned about the use of the forum in this way then your comments would have been best placed in this thread, smells of sour grapes me thinks.

Chris sounds an interesting proposition, the times not right for me at the moment, All the best with it I'm sure you'll do well.

MakeEverything - 15/8/12 at 02:22 PM

quote:
Originally posted by Mr C
Another case of not knowing the full story and judging. Chris has the right attitude as far as investors are concerned, particularly protecting his idea on an open forum. I wouldn't jump to any conclusions without knowing the full facts which are clearly not fully disclosed in this thread for obvious reasons. I also have the intelligence not to ask sensitive questions about the proposal on an open forum also.

Lastly if I was criticised rightly or wrongly for a previous comment wouldn't respond in this way or indeed post up in another thread my dissatisfaction in the way the forum has been used to tout for business. (quoted below)

"That said, i don't think (or expect) the LCB forum to support anyones business, as it is neutral ground for discussion, not a marketing board for small businesses or IT ventures."

If you were that concerned about the use of the forum in this way then your comments would have been best placed in this thread, smells of sour grapes me thinks.

Chris sounds an interesting proposition, the times not right for me at the moment, All the best with it I'm sure you'll do well.


Nope, no sour grapes at all, and i dont have an axe to grind with anyone. My original post here was intended to offer some professional knowledge and experience based on what was written - the line which i had quoted, and no 'conclusions', 'judgements' or assumptions were made.

The other post you refer to, is defending the forum as a neutral ground for discussion but i see you've chosen to ignore the positives in that one as well.

OX - 15/8/12 at 03:57 PM

Good luck with the venture Chris and i hope you pull it off as well as you have your other projects and thank you for giving us the chance to be part of it ,but i have no money so for that reason i'm out :-)

OX' the unofficial dragon '

[Edited on 15/8/12 by OX]

big-vee-twin - 15/8/12 at 04:31 PM

Hi Chris,

I am an owner of a consulting engineers practice with lots of experience designing power, emergency power and cooling etc for data centres.

I haven't got any cash to offer but could maybe offer our design experience instead, if you need any assistance in that area.

TheGiantTribble - 15/8/12 at 05:41 PM

Might I offer the opinion

min 4K might be a bit much considering a lot of people on this forum probably have any spare cash (and them some) invested in a half/quarter/threequarter/barely started kit car
what about giving a chance to small/tiny/wife screaming HOW MUCH! invester types a chance?

After all 4k min you get a couple of investers thats 8k
a group of 40 £200 (easier amount to loose on a build with out her indoors knowing about it) same thing

ok so maybe offer a lower rate of return, since locosters will be doing it more to help a locoster than turning a profit , but possibly a more realist chance of raising some loot.

Either way good luck with it


Ill shut up now

MikeR - 15/8/12 at 06:54 PM

hmm is that an opportunity for someone to 'buy' a share, split in and sell smaller shares?

ChrisW - 16/8/12 at 12:22 PM

The reason for the minimum investment figure is that I have to be realistic about how much time I spend dealing with investors both in getting them on board and in keeping them up to date during the project. If I had 100's of people asking questions I would spend a long time just dealing with those instead of getting on with the project. On the other hand of course the minimum investment level is a barrier for entry for some people.

I essentially have to pick a figure that keeps my options for investors as wide as possible but at the same time doesn't burden me with lots of additional work.

I also have to consider the mix of investors, and whether they have any relevant skills or experience to add to the mix. Greatly simplifying for the sake of an example, if I had two investors come to me with 50% each that were an electrician and an air-con engineer that would be a lot more attractive than one person offering 100% that was a plumber, despite there being twice the work to manage the two investments over one.

(Nothing against plumbers of course, just that there's not much call for plumbing skills on this project and it was the first job example that came into my head)

quote:
hmm is that an opportunity for someone to 'buy' a share, split in and sell smaller shares?


There is no reason why not. I'd suggest you would want to take some advice on how best to do it, however, both to protect the person organising it and to make sure it was tax efficient for the investors. It's probably a good idea to wrap it up in a company of it's own, or a trust, or something like that. I'm no expert in this field so I wouldn't want to give any specific advice.

Chris

MikeR - 16/8/12 at 01:41 PM

Chris, I need to email you privately as I have a number e questions but that's a bit difficult whilst doing the day job. your post above implies your looking for more than just silent cash partners. which is it cash, cash and advice or a mixture? if I'm providing cash and advice what would I get over silent investors just providing cash?

ChrisW - 16/8/12 at 02:08 PM

quote:
Originally posted by MikeR
Chris, I need to email you privately as I have a number e questions but that's a bit difficult whilst doing the day job. your post above implies your looking for more than just silent cash partners. which is it cash, cash and advice or a mixture? if I'm providing cash and advice what would I get over silent investors just providing cash?


Fair enough, Mike. I'm open to consider any kind of deal on skills on money. I can do it all myself if necessary, ie I don't necessarily need additional skills on board, but if someone came along that was able to assist in a specific area and make my life easier I'd be silly not to consider the value they would add to the company by doing so. That can be either in time on site or in providing advice by verifying that what I've designed is sound. After all, it would be in the interests of an investor to give the business as much assistance as they reasonably could.

I specifically mention electricians because I will need electrical work done. I can do the first fix myself, but I'm not 'part p' or whatever it is I need so I will have to get a contractor on site at some point. It's a similar situation with an air con engineer in that although I know how air con works I don't have any of the kit or tools to actually install it. If people with those skills came along and wanted to invest skilled labour rather than (or in addition to) money then, as above, I'd be silly to not consider it.

As said, I'm flexible, so if you have something you think would be of value to the company then by all means drop me a line.

Chris

ChrisW - 22/11/12 at 09:21 AM

Just re-opening this thread for discussion. We've had an investor drop out at the last minute so an opportunity has arisen again for someone to get involved. Annoyingly he was an electrician and was bringing with him a lot of advice and experience on that front!

So, if there is anyone else interested in this opportunity, or who chose not to get involved last time, now is your time to speak up! The project has evolved and changed a little since the first offer so if you fall into the latter group by all means ask for an updated business plan.

Cheers, Chris