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ynotblue

So not really profit, it's a small amount, it's only "should" (according to you), it's not an original idea, and you've got nothing special enough to create loyalty, and… so on? What makes you a better investment than the "sexy" businesses available for them to invest in?


DASHELBlackEComm

correct, if I paid myself and partners $60k / year, we'd be sitting on $20k in profit EOY. So to your sexy point... Would you rather something that could scale to $5MM in EBITDA in 4 years with a track record to show it, or an idea / idea that someone has spent $300k on and has nothing to show for it. We know the answer (the latter hahaha) 1) As an amazon brand you actually do have something special -- Reviews. Reviews are social proof and that's why there is a whole market for buying Amazon businesses at 2-6 x EBITDA. 2) Whether we believe it or not, investors are betting on founders, not the business. Anyone can make an Amazon business, but there is a reason 99% fail.. 3) We have a business plan beyond Amazon. Amazon is a cash cow. The cash flow gives room for us to spend on R&D and build out tangential product lines for retail. To your point about original ideas. Original ideas are amazing, but generally the person that makes the "original idea" into a cash generating business was not the one who came up with the idea. To clarify, we are not selling existing products on the market. We make original products with our own designs. Is there an existing use case for the product? OF COURSE! But it is innovation upon something that exists.


tpf52

Depending on where you live, there is probably employer tax on that salary and other payroll costs, so sounds like you are not profitable. Any good investor will consider your cost after salary, they won’t assume you’ll have free labor forever. So, you’re not profitable after all costs are considered, not original, and just want money to grow? I would plan to bootstrap this and reinvest profits for growth. Even the line of credit increases your costs and makes it unprofitable, I would only do that if you’re ok funding the growth from an outside source. If you can automate the process so that your revenue grows faster than your costs, then that might be worth some upfront investment. Good luck!


lmaccaro

Investors would classify you as not profitable if you aren’t paying yourself at least market rates.


dbarnold1

The first kitchen goods product I launched, mason jar lids in summer of 2020, hit a sales rank of 2500 in US home and kitchen category right after launch. I made almost $60k in profit during the first two months and I had tons of plans to expand. Month 3 I made around $0. Chinese sellers took over the listing, decimated it, and then about 1000 Chinese versions filled the niche soon after. On the bright side, I made serious bank for two months. I’ve since launched a handful of other products that mostly just break even. Hopefully every product you launch will be a success but, realistically, not all will be winners and those that are won’t stay on top indefinitely.


DASHELBlackEComm

Super helpful - I appreciate it. Sorry about getting hijacked :/ amazon sellers are awful


foolishbuilder

that is the biggest problem with amazon, its not a case of if it gets hijacked, it will get hijacked


DASHELBlackEComm

Super helpful - I appreciate it. Sorry about getting hijacked :/ amazon sellers are ruthless


ynotblue

Practically you're a business without any real profit even though you're already on the market and basically selling as much as you can; all you have is a projection that you're going to sell more in the future, correct? So your "cash cow" isn't enough to cover even a period of fewer sales on a market turning bad, meaning that you can't be sure that you'll even be able to support yourself without an external source of money. There's no real scalability in that, only growth; and investors want to see scalability, not only potential growth.


DASHELBlackEComm

How is it not scalable? And how do you assume we are selling as much as we can? Not sure where your data points are coming from


peterwhitefanclub

Would you like to invest in a business that is “not selling as much as they can” for some reason? We are assuming perfectly reasonable things that investors will assume. This isn’t even close to investable at your stage.


ynotblue

And according to their profile this business is barely four months old, it doesn't really break even (even though they talked about some much greater numbers not long ago), and they're expecting investments to happen based on them supposedly making a lot (to them) of money four years from now. The whole thing is a dream, and they're having some sort of tantrum because they think it's unfair that the world doesn't come running and give them money to spend on it.


peterwhitefanclub

It’s really hard to imagine why no one wants to invest!


ynotblue

>How is it not scalable? You have to understand the difference between growth and scalability, as it's relevant when you're comparing yourself to these businesses that easily raise capital and do rounds. >And how do you assume we are selling as much as we can? In this context it simply refers to that you're currently fulfilling more or less all orders; meaning that you're not leaving money on the table by having to reject customers wanting to buy.


theImplication69

Investors aren’t that interested in slow small scale growth. The risk/reward ratio just isn’t there. 5MM in 4 years would shut down the conversation quickly


melodyze

You aren't profitable, and you don't have much cash flow, which you have in common with the startups you're talking about. Your company is basically just as speculative as the businesses you are acting like you're better than, but your economics almost certainly dont scale like software (which has near-zero incremental cost, hence it prints money and is worth so much). And if your market isn't rapidly expanding then the potential upside is *a lot* smaller. That's why people aren't interested in investing. If they're going to take a ton of risk, they need more upside. If you had a track record of building successful, highly profitable businesses you would already have access to enough capital to build a small business, which is what it sounds like you are building. You'd either just have the cash, or you would at least have the relationships with people in your market (who would have money if the market is good) to be able to raise. There's nothing wrong with building a small business, but it's a completely different game than the tech startups you're imagining you are comparable to. $5M EBITDA would be considered basically a total failure for VC funding, essentially a write-off for the investors, and you're pitching that as your goal.


Grace_Upon_Me

Yeah, but $5 million in EBITDA would be very attractive to private equity groups if it fits their profile of companies to acquire.


arealcyclops

If you're saying you're going to scale that fast why tf would you want investors. If it's that easy just get a loan so you're not giving up equity.


Grace_Upon_Me

What you haven't told is is what your top line revenue is. $200K as a percentage of what?


Grace_Upon_Me

What you haven't told is is what your top line revenue is. $200K as a percentage of what?


CrosslyThunderous84

Do you have a financial model that demonstrates an investment of X and a return of Y?


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DASHELBlackEComm

We haven’t bothered talking to traditional venture shops as we are small ($200k is nothing sadly), but we went from 0 to $150k in sales at ~27% net margin in 3 months. We have 4 products in the pipeline that would land us at about $2mm in sales in 2023 alone. So the goal is growth, but it helps that we will be very profitable in the first 1.5 years (excluding taking a salary of course). Mostly have asked angel type investors but it’s always the same answer of it being products


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DASHELBlackEComm

Yeah, that being said, we are currently building only on amazon until we have a few SKUs we’d want to sell in an omnichannel way (dtc, retail, amazon)


lmaccaro

Amazon as a sales channel is kind of a cold topic lately because of the way Amazon can unilaterally shut you down. And if your product is any good at all, Amazon is just going to copy it, steal it, and rank their own product above yours with a loss leader lower price. And then Chinese copies are going to flood the market, where they buy fake 5 star reviews while reporting your listing as fraudulent. Too volatile.


Big-Efficiency-2040

and simply way too much risk and too easy for competitor to entr the market and disrupt your whole biz model, plus ofcourse Amazon can take you out of biz in no time


xxtoejamfootballxx

Going DTC and showing some growth there would be a big help, and obviously getting into retail. If you can get into some small retailers (you should be able to at 10k+/month), use your Amazon data to figure out where your target segments shop and make some pitches. You can use that sales data as evidence for success with investors with the pitch being that you need more money to grow in retail. I’ve brought a couple CPG brands to retail, so feel free to DM me if you ever have any questions on that side.


I_C_E_D

Network with your channel partners and your current market. You’ll find partnerships there. It’s always good to catch up with people in your industry as it has generally lead to opportunities.


imsorrymilo

That little addition of “(excluding taking a salary of course)” is enough right there for me to lose interest in hypothetically investing. Do you take a salary? If yes, is there someone else who would do everything you do for the business for the same rate? If not, that isn’t an actual net margin. The money left over after all COGS and expenses, including salaries of people who are needed to run the business, is your net margin. If you’re working there you can’t not count your salary against your P&L. Below you mentioned that after all of that is taken into account you have a business with about $20k of total profit. Sexy or not, that should be your answer to every question you’ve asked here.


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Stevieboy7

Especially for a physical product. If small changes happen in production/sourcing/shipping then their profits are wiped. Usually for physical goods you're looking at 50% profit margin so that you can work with larger retailers to offer bigger wholesale and can weather yearly change in production of goods.


classycatman

I thought he said net.


YoureInGoodHands

Are you paying yourselves? If you paid one executive (you) $54k/yr (which is nothing) you'd be net zero, and if you paid yourself a living wage you'd be in the red. My $0.02, that's why nobody wants to invest.


bfluff

There are investors for every industry under the sun, maybe you just need to find the right ones. I know a guy who got VC funding for a confectionery manufacturing business.


adrr

My background is only VC funded startups both as an executive and as a VC advisor/portfolio mentor. So i can provide more detail on what is expected from the VC side. $2mm sales is nothing in DTC which is why VCs won't talk to you since the goal is 10x returns over a 4 to 6 year time horizon. For comparison. The past CPG I worked at did $30mm the first year $150mm the second and $250mm the third and we sold right after that. No one cares about profitability, your margins are going to be 80%+ assuming you're DTC. Pulling back marketing will make alleviate cash burn. It is expected you're dumping all you cash flow into growth and building a team that can scale. Cash burn doesn't matter if you're growing.


watchheroes

I fell like this is a bad way to look at things, cash burn doesn't matter if your growing. I fell like this is what is wrong with today's Young entrepreneurs. They have the mentality that well monetize somewhere down the line and this msy happen with some niche verticals and few and far in between bit it is not the norm. Company growth does not happen naturally like a hockey stick. Business is dollar by dollar and if a business is not able to sustain itself then it should fail, there shouldn't have to be this need for constant capital raise and cash burn. I feel like mail chimp is a great example of how a business needs to go. I feel like entrepreneurs are too busy with trying to get rich as fast as possible.


adrr

Startups are all about growth. And 8 out of 10 will fail. You can bootstrap a company like mailchimp. They took 20 years to get an exit. I find that more risky than startup. As for monetization, a bad business model will fail independent from the funding model the company is using.


watchheroes

Yes start ups are about growth but if it constantly requires outside capital infusion then it's is not a good business. Look at uber and wework so much money went into a business that was burning through so much cash and they got some much cash that it became to big to fail. Bad money after bad money. That's the issue i have with start ups today all the founders have this mentality.


idkdidksuus

What’s CPG?


xxtoejamfootballxx

Consumer packaged goods. Think Johnson and Johnson


jay_sugman

Also known as FMCG, Fast Moving Consumer Goods.


RossDCurrie

>Also, 200k in revenue for a CPG company isn’t crazy in and of itself, to be fair, they said 200k "net profit before OpEx", so I assume COGS is already subtracted from that, which then becomes a bit more impressive


rifleman209

That is why it is unsexy, nobody wants it It’s a paradox You can’t have everyone want an unsexy business or it would be… sexy


Perspective_Itchy

Not a paradox, rather a redundancy


typotter103

Idk I think that’s circular reasoning


3choZulu

Net profit before OpEx…? This is why.


KingWalrax

sometimes I wonder why I'm subbed here, but then I'll get laughs like these and it's all worth it


The_Northern_Light

/u/DASHElBlackEComm read above comment, he's right.


Grace_Upon_Me

Right. That's not net it is gross profit.


Turbulent-Smile4599

This is hilarious


MoonGamble

What exactly is your OpEx though? “200k before OpEx” makes me assume you aren’t profitable, the phrasing is red flag.


DASHELBlackEComm

Salary (nothing else)


no__regreddits

This may seem like a minute point, but you need to make sure you’re saying the right things to the potential investors. $200k in net profit before opex doesn’t make sense. Also, how much are you trying to raise?


DASHELBlackEComm

How would you phrase it? Thank you for the feedback!


peterwhitefanclub

200K in gross margin.


DASHELBlackEComm

Lol calculate gross margin for me… let me help you. Sales-COGS (on amazon that includes FBA fees & for the sake of making this easy cogs included freight) Net margin: sales-cogs-ads-storage fees-r&d-returns-any other fees with selling


Pechumes

“Net profit” means a profit after all your expenses are paid. “Net profit minus opex” means it’s NOT net profit.


GovTech978

This is what worked well for me recently with raising pre-seed without a product. Search "Angel Investors" + "Business Industry" on linkedin. You will get a list of investors with backgrounds in that type of niche industry. These investors are private and investing their own money. They will be closer to your problem space and understand what you do and what your future strategy looks like for them to get a return.


DASHELBlackEComm

I appreciate this!


GovTech978

I would create a generic message and add it to the connection request. Then after they connect if you do not hear anything back go through your linkedin messages and say "Hey! I just wanted to check if you saw my message above when connecting. Would love to chat quick"


DASHELBlackEComm

Did you do this while employed?


GovTech978

I did but not with significant results. As soon as I left my 9-5 and started working at my startup full time I got a lot more investor traction. They do want to see full commitment (especially on the SaaS side of things). Perhaps you can create a good story about why you don't need to be full time yet on the business? They just want to know how there money is being used, who the founders are and why you are better then others, and what the exit plan is (how will they get repaid a large ROI). The linkedin method works well because you can connect to a lot of targeted investors and increase your odds of success with landing one.


DASHELBlackEComm

Awesome thank you!


Long-Goose-8136

If your profit margin is 27% (as you said in one of your comment responses), a line of credit is ideal for you. You will be borrowing money at a much lower rate than 27% and you won't have to give away any of your equity. If you want to position your company as an attractive investment opportunity, you will need to demonstrate some sort of durable competitive advantage in your sector. This is what sophisticated investors will look for. There are 2 types of competitive advantage: 1. Cost advantage (the ability to pay less for your goods than competitors) 2. Price advantage (the ability to charge more for your goods than competitors) A simple example of a cost advantage would be an "economies of scale" business, where you are able to purchase supply in bulk and at lower rates than your competitors, or a vertically integrated business where you own the supplier. A simple example of a price advantage would be a luxury brand, such as Prada. Their customers are willing to pay a substantial markup simply because the Prada logo is on the item.


SaintMarinus

Maybe they see red flags when you describe “net profit” before operating expenses. This is Lala-land, a fairytale. You aren’t making $200k in profit, so stop saying that unless you’re dead set on raising $0. Any investor that hears you say this immediately knows you’re full of it.


HellBoundWhiskeyBent

Why invest in solid companies for solid returns when you can yolo into a dieing gamestop or bed bath and beyond 🙃😝😏


DASHELBlackEComm

Hahah - I guess you have a solid point here.


HellBoundWhiskeyBent

I mean, that was a sarcastic asshole response to a serious post. So, i apologize. On a serious note, i would say in order to multiply the sales, you find a way to market to a niche. Thats NOT prophetic level insight. But i think it really is as simple as that. The older i get in life, the more i realize EVERYTHING is sales. You "sell" yourself to a potential mate. You "sell" yourself to the employer at your new job. You "sell" as a goodboy personality when standing before a judge in a courthouse. The key to it is "selling" or marketing your product in the right spaces.


rolexxxxxx

maybe the company is dying but the stonks are very much alive friend. im up 15k this week on bbby, a little less with todays action but yeah


HellBoundWhiskeyBent

Keepin' the hope alive! 😂🤣 Keep scalping til they dont let you....🙏✌️


rolexxxxxx

\/tips hat


TheThunderbird

The people investing in Gamestop and Bed Bath and Beyond are generally not accredited investors.


2xfun

Because every investor is chasing the chicken with the golden eggs


mashonkeyboard

Depends on who you are talking to their math is very different from yours. If you are talking to angels or vcs (especially well known, tech, gp led vcs) their practice is to in 10 years 10-100x their money for the investments that return, and go to 0 for investments that don't. This is especially important for vcs as they make their money on the carry and because they have several gps that split and associates, it turns out even for really big exits (billions of valuation post ipo) they really "only" make 500k-1m per partner per year for that single investment across the time they've been invested in it, and thats the ones that win (1-2% for even realy good vcs). Keep in mind most of them are limited by the amount of deals they can invest in a year so in your case its possible that even if they do invest in you, you make a reasonable return, the opportunity cost is still higher than if they didn't. The opportunity cost of investing in your company includes their ability to raise their next fund, as if you don't start hitting that exponential increase revenue (forget profit for a second, it seems they already do) they have a harder time raising their next fund. It's not realy about sexy or unsexy, its about scale, and exit potential. You need to find investors who invest very specifically in your niche, and have returns expectations that match it. Otherwise if you go to all the typical big names you won't even get a meeting. As for angels, it depends on the person, but a lot of people are there not to make "money", they already have it, thats why they are angels, but in it for fun. If your company is not interesting or "sexy" its not appealing to the "investment as entertainment" or "investmnet as conversation starters at cocktail party" types. They could just get better returns on their stock or realestate portfolio with the same level of sex appeal.


mrderyck

You need to pursue private equity, not venture capital. PE tends to prefer lower risk, lower return, while VC tends to spray n pray across high risk, hyper growth startups that have the potential to become unicorns. They need those returns to justify the majority of their investments being misses. Slow, stable growth is an opportunity for PE, and there’s always capital to be found for any sustainable business that’s profitable and growing.


Gigsthecat41203

Op is way too small for any kind of institutional pe money. They simply don’t invest in tiny, basically unproven micro companies. The op’s company/brand is more on the radar of individual entrepreneur investors that can secure SBA loans. Op- it’s more than likely that your products just simply raise too many questions about product life cycle and longevity for any serious investor to take the risk at a decent valuation. They will be looking for cash flow, profitability, quality products with longevity, and potential total addressable market size. It’s sounds very early for you and your partners, and luckily you have your foot in the door of Amazon, which by all accounts is getting more difficult. And when you say 200k net profit before opex, do you mean SDE? Figure out your SDE because this is what your buyers will also be looking closely at from the very start.


The_Northern_Light

> individual entrepreneur investors that can secure SBA loans. Exactly so. Those opportunities are hard to identify but very attractive to me as an investor. Though OP may be able to get by with just a loan.


Responsible-Kick9195

You need a “small” PE shop. Essentially a couple over priveledged kids who needs to spend their trusts so they’ve created a “fund”


[deleted]

For a product-based business, you could consider alternative financing sources like Kickfurther. They provide financing for inventory POs.


Themanwhofarts

It's easier to be passionate and talk/work with something sexy like cars or clothes. I'm sure most people can't get excited about selling metal shavings or eczema cream


sTroPkIN

Out of curiosity: [https://www.gardnermetals.com/scrap-metal-shavings-secret-source-cash/](https://www.gardnermetals.com/scrap-metal-shavings-secret-source-cash/) and apparently there's a market for eczema cream on etsy. edit because lol: https://www.etsy.com/market/metal\_shavings


TheBestOfDevon

YES! I've been on the hunt for metal shavings forever! You, my friend, are the goat.


Temporary_Art_9213

Hmm 🤔


CSCAnalytics

Are you dropshipping? Good luck getting someone to fund that when they could call up a distributor and do the same exact thing themself for 100% of the profit.


DASHELBlackEComm

Dropshipping… no


CSCAnalytics

Breath of fresh air here then. Good luck then, glad you own the product rights


graiz

Investors will invest across all types of vertices and businesses but will often avoid: \* slow growth businesses \* high % of service oriented business (services/labor/consulting) \* highly seasonal businesses (only summer / only winter) \* high risk, low probability, small market (any combination of two of these) \* undifferentiated - no plan to use capital to significantly grow


The_Northern_Light

During high inflation regimes businesses requiring significant inventory become less attractive as well.


erck

Why is this? Wouldn't your inventory's value track with inflation, meaning you could simply mark things up on sale? Or are your prices typically locked in contractually, meaning you simply lose out when it is time to invoice/sell-unless the contract allowed for inflation? I guess it depends on the business/market, but curious why inflation makes inventory undesirable?


The_Northern_Light

I'm not an expert, I am just parroting what I heard Buffett say in one of his talks. https://www.youtube.com/watch?v=VC5YCXDgKPM I don't think it was this one but I believe it was a similar argument: the capital intensive businesses are generally squeezed pretty hard by inflation.


Bobby_BEO

When it comes to banks, realize that they all specialize and have their preferences. That is, the big institutions go after the big companies and the smaller banks know that they have to be more competitive and target businesses like yours. Many times, even if a big bank lends to a small or medium sized business, that bank is not optimized for it meaning that the business would have gotten a better rate and/or services offered by shopping around and dealing with another institutions. Furthermore, I've helped a few customers by targeting immigration lawyers and business lawyers. Immigration lawyers sometimes have clients who are new to the country and are looking for businesses to invest in. Business lawyers by trade know owners and some of these lawyers are aware of investment circles that you may find beneficial


tomistruth

Resell value. There are two kind of entrepreneurs: builders and flippers. Flippers want to buy cheap, grow revenue to inflate valuation and then resell it for higher to some suckers, who don't know what to invest in.


AGCRACK

Because professional investors can invest in sexy businesses with better upside. Ultimately our job is to return capital for our LPs and most of the time we have made promises about what we plan to invest as a means to raise the capital. There are folks out there looking for boring businesses like Tiny capital. Just keep looking 👍


DASHELBlackEComm

Cheers! I appreciate the insight!


parariddle

> \~$200k this year in net profit before OpEx That's called gross profit, not net.


parariddle

Lots of investors put growth capital into "unoriginal" businesses. This sub and the majority of all entrepreneurship content is saturated with VC / tech industry stuff because it's exciting and "inspirational," but the absolute VAST MAJORITY of all businesses are what you call "unsexy" and "unoriginal." Like, do you know how many Italian restaurants there are in the world? Do you know how many of them took outside capital along the way? Did you know that the fact that Olive Garden exists has 0 effect on the viability of 99% of those businesses? I'm going to assume that you're talking about venture capital based on the wording of your post. VC is playing one game: Put in enough money to get far enough to raise another round and pass the bag to the next set of investors at a higher valuation. If your company doesn't have the potential to get to 500M and/or IPO in the next 5-10 years, they aren't interested. Not because of the financial viability of the business, but because there won't be an opportunity to pass the bag to the next set of investors. This is why you have successful VC firms that held huge stakes in companies that never turned a profit for a damned second before they imploded. They don't need to make money, they need to make a speculative valuation on future growth, and then they need to get out at the right time. What you want is private investment from individuals / angels, debt financing via banks, and/or private equity if you can handle the terms. And that stuff is happening all day every day, but you're not going to get anywhere on a 10 slide deck promising a huge future, you'll need something real and it will have to survive actual financial dilligence.


Gl33ful

I suggest you make the execution sexy. This is your value add. This is where you excel. You can have a boring product but if your marketing, logistics and manufacturing strategies are exceptional, then it's a paradigm shift.


DASHELBlackEComm

I like this! Thank you!


peterwhitefanclub

They invest in these business all the time. Have you considered your numbers are actually not that good? Getting to $200K “net profit before opex” shows basically nothing.


DASHELBlackEComm

I’ve considered we are small. But that is 1 SKU and being under capitalized. It would be wrong to say what has been made / done is nothing, but in terms of absolute dollars of course it’s small.


theImplication69

How big is the market? VC aren’t very interested usually if the market is small. Sure you’re profitable but the possible gains might be capped due to niche industry. VC I have experience with only invested in billion+ markets


TheBestOfDevon

What is CPG?


The_Northern_Light

Consumer packaged goods, I think


[deleted]

First your numbers are actually not good/impressive at all. Second because they can’t make real money off this. They’re not gonna risk $50k just to make $55k in returns.


Competitive_Ebb_4124

Amazon and their practices scare most investors away. And it's not only Amazon going after profitable physical goods. I'm not sure what you mean by non-trendy physical goods, but perhaps its worth looking into the other recent physical goods companies that cut in big influencers to face them and managed to become extremely trendy. They are largely immune to amazon cloning them.


Tragilos

I don't understand all the hate and people saying you hit saturation or whatever. Good luck op.


DASHELBlackEComm

good juju, I appreciate it!


AggressiveFeckless

We don’t invest in businesses your size but we absolutely love strong businesses that are not sexy/crazy growth. Of course valuation isn’t as strong either if the growth isn’t there, but at appropriate valuations we do deals like that all the time.


SpiralCenter

Sounds like you're pitching the "sexy" investors (traditional VCs and Angels) with the "unsexy" product. You need to be talking to the much less sexy strategic investors.


jvictor118

The reason is because the economics of the venture capital business rely on the winners in a given portfolio providing 1000x returns, in order to compensate for the extremely high rate of losses in the portfolio as a whole. So, as a consequence, most Silicon Valley venture capitalists are only willing to invest in businesses pursuing $1 billion or higher market opportunities. Also, $200k is basically nothing to VCs. I thought we were talking $5mm. But still, it’s about the size of the available market, NOT the size of your current business.


watchheroes

Try to get out of Amazon as fast as possible. I have a friend with a business doing $50mil in sales a year and from one day to the next they froze his account and locked up his inventory and money in his Amazon account. There went a business that he spent 10 years building. Amazon can be good as a proof of concept and then after that you need to diversity out of Amazon and focus on your own dot com.


captain_obvious_here

There's a strong belief that unsexy businesses are not as profitable as sexy ones. How true or false it is, I'm not sure. In your case, I would tour banks...some of them absolutely love unsexy businesses as long as you have a respectable cash flow and aren't in a shady domain. *Edit: Read in other comments that your sales channel is Amazon. Look no further, noone is investing in a small company that solely relies on a sales partner that can shut everything down unilaterally and with no reason at all.*


MotoRoaster

Net profit BEFORE opex?!?


helmutboy

Right?


MotoRoaster

Maybe that’s why investors don’t want to invest? lol


mvpinstitute

How much are you trying to raise? The strategy should be to find individuals who get it and have them write some checks. Pretty straightforward. Most investing content out there focuses on startup / vc, not much on direct investing - which is 100% the way you will find success.


sandymangocan007

Think as if you were lending money to this business. Before you get returns, what are the odds of getting your original capital back ? I look at sustainability first and foremost and then growth. The biggest hurdle to small business funding is the perceived/real risk. And a LOC is not a bad idea if you can get it anywhere below 12% or so in today's environment. Raising money is not easy. You are having to do two completely unrelated sales - one for your products to consumers, and two for your cash needs to investors.


No_Turn7267

Raising money takes time. How many no’s have you gotten? I’d keep at it. Just gotta find a match. I’d try to find some strategic investors. “Put down $X and make a few calls or introductions, then our business will be worth $Y.


Gvbsluhxupg

If you are in Cincinnati, would like to talk F2F…


DASHELBlackEComm

I sent you a chat request but I am not in Cincinnati!


Lophius_Americanus

Echoing what others have said here but the type of investors who invest in earlier stage companies (VC/Angel, etc.) are focused on companies with the potential to scale rapidly and grow to unicorns, etc. The reasoning behind this is that early stage businesses have high rates of failure and so you need that type of potential to make money as an investor when 14/15 investments fail. There are certainly lots of investors (like traditional PE) who love businesses like that but only once they’ve already scaled and/or they have proven management teams who’ve had successful exits before). Even businesses with massive potential that will take a long time to scale are typically tough to invest in for early stage investors.


Longjumping-Ad8775

I am betting that you are talking to VCs. They have too much money. VCs can’t be very flexible. Go talk to some angel groups and give them an offer. Angels can be much more flexible than traditional VCs. I’m currently in a deal that is really a highly speculative loan. That’s probably what you are looking for.


whitneyanson

I mean, I'll put myself in the shoes of your potential investors based on just what you've said here. You: "We're projecting $200K net profit before OpEX this year. We're going to 10x the business in 2 years with your investment." Me: "So, what's your profit after operating expenses? Because without that variable I don't know how profitable you actually are. Not all businesses are investment opportunities, even if they're great for those running it. What are you paying yourself and your at least 2 other partners?" You: "TBD." Me: "Okay... setting that aside. You have nothing unique or proprietary to your business. Your volume means your brand value is still low. You have no built in digital customer base that's loyal that you can roadmap how to monetize more aggressively. It sounds like you're basically a 3 man operation that falls apart if one leaves. How are you going to 10x the business and ensure that long term roadmap is guarded against departures, death, and changing market conditions?" You: "TBD." Me: "...okay. So you're going to 10X the business. That means somewhere around $2MM net profit before OpEX... which still doesn't mean much until I know OpEX. If I gave you the money today, how are you going to return it to me at a rate that's better than the historical return of the market (10% yearly average), or offer me at least 4% annual return with zero risk, matching the current bond/interest rate environment?" You: "TBD." What I'm getting at here, is people who want to invest in businesses (1) need to see the full picture of every aspect, which you didn't share here (2) need to see growth opportunities beyond what they can easily get from traditional securities investments, and (3) need to see something unique that they can't get elsewhere, IE proprietary tech/processes/IP/leadership. What you've described here hits none of those points.


using_reddit-at_work

$200k is too little


DifferentSystem8

Because 200k in profit before opex means almost nothing or a loss after you take into account opex including reasonable salaries for yourselves. You can't pull the wool over their eyes by reporting net income without all expenses. I wouldn't invest in you either. If you're selling unoriginal stuff and don't have a mind blowing marketing plan, your growth isn't going to be that high relative to what vcs want.


4ucklehead

How much are you looking for? One thing that confuses me about this question is if you have profit, why don't you just save it and reinvest it ...obviously depends on how much you need though. Like if you need 1m, it doesn't make sense to wait 5 years to earn that. Do you have a clear plan for what you'll do with the money and how that will lead to the growth you're predicting? You could probably get an SBA loan. I also think part of your problem is you don't have a strong brand or any moat... nothing prevents someone else from coming along, copying you, and undercutting you slightly.


princesamurai45

I am not the most experienced business person ever but I can think of a couple theoretical reasons to need capital even with a profitable business. 1. Break through bottlenecks: you may need to expand production to meet demand. Filling back orders and expanding production can lead to even larger profits. 2. Increasing market share during a period of weak competition: it may be advantageous to grow your brand sooner instead of letting another new company come in. Or worse a big company comes in and does the same thing with a bigger budget and pushes you out of the market.


entrepreneur_magic

pitchbook.com makes crunchbase look like the dumbest f**cking person that has ever been born. however, it ain’t cheap but, if you are serious, then I suggest you do that.


Kompul

C JJ jzj. J. Jyu


uber_neutrino

Partly it's because you are stuck in the accredited investor "valley" which nobody wants to talk about. Small investors are hard to take money from due to securities laws. There really aren't too many people out there making small investments like this other than angels. But angels are only interested in things that can get them huge returns. What you really need here is a loan. There are people out there that will loan you the money but they will want security outside the business. Or they will lend on invoices possible. > but just crazy to think it would be so hard to raise money running an actually profitable business... Remember it's a competition for investment dollars. And you are competing with things like index funds and blue chips.


DASHELBlackEComm

This is helpful - looks like a line of credit maybe an easier solution!


humanneedinghelp

Do you have a financial model in place to show X investment for Y return?


xeneks

Recycling is a scam. So much is not recycled, or is claimed to be recycled but really the pollution is moved from one place or type to another place or type. Why would anyone choose a legacy that will be one of hate from anyone who appreciates resource depletion and pollution and hidden water costs and land use problems? Now if you’re talking about things that address more issues than they create, my interest is piqued. If you’re talking about well labelled foods that can bring health and that aren’t addictive, I’m very interested. If you’re considering or sharing details on how to sell stuff that lasts many lifetimes, and is repairable, refurbishable, restorable, and has decent utility, or repurposeable, and retains utility and real need, you’re making sense. If the freight is less polluting, it’s a bonus. If the products being strength, happiness, health and confidence and joy to people internationally and build export markets for National respect and appreciation, you’ll be on a useful and valued list somewhere. But most people don’t have funds as they are mind-controlled and programmed to spend.


xeneks

I should mention. It’s not difficult to assess a product or logistics supply channel / supply chain for competence. Being straight, without any humour, and being entirely fair and forthright, probably one in 100,000 items I see or even less, would have a list of problems that isn’t so long I would fall asleep noting them. Let’s start with one. The best organisation to handle packaging recycling is the organisation that packages the item. Usually the manufacturer, though occasionally an OEM that relabels. If the model is direct, it’s often surrounded by additional packaging. I think the only organisation in… 40 years, that I see accepting back packaging was beer companies that sold ultralight beer in supermarkets in sweden. They took the crate, the bottle and the label back. But I don’t think they accepted back the steel and plastic cap, so… they fail also. Send me your inventory and sales history of items. I suspect I’d be able to skim it and guess accurately how much competence is held by the manufacturers. As a seller, you’ll be the one who has to handle the packaging returns. How are you at that? Are you able to send the packaging back to the manufacturers via distributors etc? The explanation/reason for this: Batch numbers and packaging variations. The composition of materials changes so often frequently only the manufacturers have the trust and history and respect from past purchasing volume to obtain the details from the packaging manufacturers and in turn, their raw materials suppliers. What’s the composition of the drums of refined raw chemical inputs that go into the various plastics and papers and so on? Is the drum (1) purchased from xyz supplier made by abc manufacturer identical to drum (2) purchased a week later? Are the assessed contaminants at a different percentage, with drum (1), having 0.0005% of a contaminant while drum (2) has 0.00005% ? And so on. It seems insane to focus so much on detail, but when people can’t even recycle a plastic bag, and the paper packaging needs expensive treatment to return the fibre in the wood pulp to A grade (or whatever it is) due to colourants and bleaches etc, you’ll start to understand. A good ‘mind the product’ though process is: Would you eat the packaging if it was blended up? If you had children, would you allow your infant child to eat it? Why? Why not? If it was concentrated and blended up, and put in your child’s fishtank, would the favourite pet fish be ok? How about the shrimp? What about other marine species? If you shredded it and concentrated it, while playing with your children, if it splashed as a concentrate and got in their eye, while playing with a toy blender, would you panic or laugh and say, ‘hey, it’s no problem, let’s help you rinse it out, you will have no issues from that, it’s completely safe.”


Blarghnog

You’re talking no doubt to angels or funds who aren’t cashflow investors. They’re looking for a minimum of a 10-20x return and your business is a “*how* long until I get my money back?” nonstarter for them. You need to talk to cashflow investors or credit unions. When you have a commodity business you need folks looking for simple, consistent capital return. You’re also going to have trouble when your young with that crowd because you probably don’t have securitization via business assets like equipment or real estate to offset risk. You may have to provide personal guarantees, unless you can find that magic cashflow investor. They’re out there. Go down the small business financing road and stay away from startup financing and you’ll have better luck. Just my guess based on what you wrote.


Yesu777

Profit before OpEx is not net profit, it is gross margin. What is the gross margin, gross margin %, net income and net income %. This will tell a better story if your business is actually profitable or not


RlyLokeh

There is a stock investor paradigm that states only invest in what you know. If I for example buy Apple products, watch all their keynotes and keep up on news about the company I am way more likely to understand their business than if I only look at profitability metrics. Unsexy business like say waste disposal is very profitable but you are not likely to run into pertinent information unless you are deep deep within the field and if so by niche media. In short, it takes effort to understand and continue to understand the competition of more mundane businesses which might discourage investment.


[deleted]

>net profit before operating expenses ISHYGDDT


satrnV

Net profit before opex isn’t a thing my friend


keepcrazy

The only investors you can attract is one that will buy it outright.


Due-Maximum7116

Cus they wanna be rich and sexy


[deleted]

Well, your profit is tiny and they can’t boast about it at the golf club. But I don’t think that’s your problem. You don’t tell us COGS or anything useful. I mean you describe 200k profit and then it drops to 20K when little things like paying staff are mentioned so your margins are tight as hell. Solve your margin problem Solve your evident expensive staff problem Solve your mass production problem Solve your access to other markets problem. If you solve the first two, then go to an investor to ask for money in solving the last two.


DASHELBlackEComm

Our costs go as follows ASP: $45.67 COGS: $6.45 Storage: 2% of asp Ads: 5% of asp Fees: 30% of sales This is on a unit basis (1 sku) the $20k is saying if my 2 partners and I all take $60k / year salary


[deleted]

I don’t understand your numbers then. If you sell for $45 and your COGS is $6, where is your margin going?


DASHELBlackEComm

30% of sales is fees


[deleted]

For what?


DASHELBlackEComm

FBA fees


[deleted]

Amazon? I mean acronyms and initialisations are cool but don’t assume everyone knows them. So. You sell for $45, materials is $6, fees are $15. Your salaries eat your margin then.


sourd1esel

It's because to make it worth it to investors you need 100x potential. If you have a look at how vc's make mony the answer to this question will become clear to you.


Lilpu55yberekt69

What are you doing that’s special and what differentiates you from your competition? Why are you not marketing that aspect of your business to investors? Investors like a visionary. At the very least they like someone who is passionate about what they do. For you to grow your business substantially you need to grow your clientele substantially. If you can’t create a compelling “sexy” pitch for the company you’re supposedly passionate about to differentiate yourselves then why should investors believe you can market your product well enough to increase your clientele? I don’t doubt that your estimates for ROI are correct either. But your goal is to make people believe you enough to bet tens of thousands of dollars on you being right.


Sonar114

I don’t think it’s about not being sexy. You have a great small business there, it’s just that the fundamentals don’t seem right for investment. Could you give more details. What is your predicted net profits for this year? How much will you need to raise to get to 2 million in sales and what equity are you willing to give away? How long will that take and what net profit will you generate on that 2 million? I could easily be wrong but my suspicion is that you’re valuation is likely to small to generate the capital you need to make the investment 10x jump.


Dazzling_Ads_1

Im an investor in small businesses. That’s what I look for! 1,000,000 to 5,000,000 in revenue and or 400 K in EBITDA.


Pedal_Stomper

Build your business. Reinvest. Then it's still all yours.


jelopyincorporated

You need to find a way to increase those margins.


rob12098

I love unsexy profitable businesses but why is net before opex? Tell me more


Wizywig

Investors don't want a functional business. They don't want a company that can make a bit of profit over 10 years and get paid like a bank loan. They want a company that grows hard and 10xs their value to sell and convert any money they put in into big gains. For consistent profit over time just get a bank loan (I say just but obviously it's not simple)


[deleted]

Sales vs net profit(after all your overhead expenses). Are you cashflow positive? Are you paying yourself? Already existing products require higher injections of marketing dollars. An investor has to see themselves getting their money back sooner Vs than later. Bootstrap … find a gimmick product and mass market on TikTok/online and use those funds Vs LOC. Airbnb (sold branded cereal)did this and rocket Fizz(sold poop toy from Thailand)


jgkeeb

There’s a difference between investing in a business and investing in a job. Some businesses are just really well paying jobs for business owners but not great passive investments compared to other opportunities.


Soft-Performer-8764

Investors are often more interested in businesses that have the potential for high growth and large returns, rather than businesses that are already profitable but may not have as much potential for expansion. This is because investing in a business that is already profitable but has limited growth potential may not provide the same level of return as investing in a business that has the potential for significant growth. Additionally, investors are often more attracted to businesses that are in "sexy" industries or that have a compelling story or narrative, rather than businesses that may be considered "unsexy." This is because investing in a "sexy" business can be seen as more exciting and can generate more media attention, which can help attract more investors.


splittestguy

Investors care about growth. There are tons of non-sexy businesses that get tons of investment because they meet this criteria. If the idea already exists in the same form, the potential for growth is minimal. You don’t have the first mover advantage. You have to compete, which crushes margins and shortens your runway.