500k risk free to invest /start a real business. what would you do?

ironnchef's picture
Rank: King Kong | 1,938

if you were given 500k to start a business...what would you do with the money?

i've partnered with a real seed VC fund with 10mm. We are looking to fund 20 companies, 500k each for 20%. Looking for idea stage companies...you bring the idea...we supply the cash.

you don't need revenue...you don't need to have created the product...you just need an idea...an idea wth POTENTIAL

rules

  1. you can't buy/sell/trade public securities
  2. you can't use the money to pay yourself a salary
  3. you can't buy real-estate...but you can lease for the business

You can start any kind of business...and you don't need to invest your own cash or credit.
What kind of business would you start that requires initial capital?

Daycare center? Korean BBQ restaurant? Gourmet Food Wholesaler? Medical Clinic? Electric Vehicle manufacturer? anything you can think of!!

This fund has a goal of job creation, with profit as a secondary (but still important) goal.

An example of a business we funded so far was a daycare.
Nannies are expensive, and there is a shortage of affordable daycare facilities.
We funded a multi-location business, where staff are load balanced depending on need.
Parents sign up, and can drop their children at any of our locations. We expand / move around staff based on need. Our 500k infusion has spured the creation of 100 jobs.

We would like to do more of these...or really any business where our funds can spur job creation.

Comments (51)

Mar 25, 2020

Is this all hypothetical or is this your situation?

It'll depends on the subject matter expertise of the person with the cash.

If it was me, I'd build out another tech company. $500k will get you to MVP and first customers, then raise more and scale. No inventory to worry about, operation costs are low in the beginning, sales costs can be managed and optimized, and you can convert leads digitally. I love the internet.

Lot better than spending $250k on opening a restaurant or brick and mortar where you have to worry about operations, overhead, employee turnover, fluctuating food costs, sanitation, licenses. insurance, marketing, supply chain, faulty product, etc.

"Out the garage is how you end up in charge
It's how you end up in penthouses, end up in cars, it's how you
Start off a curb servin', end up a boss"

Mar 25, 2020

i'm actually doing this. have partnered with a real seed VC fund...looking to fund new business at the idea level. 500k for 20% equity. If you have an idea, we want to fund it.

Whats your idea? please be as specific as you can.

Mar 25, 2020

What type of business?

Mar 25, 2020
ironnchef:

i'm actually doing this. have partnered with a real seed VC fund...looking to fund new business at the idea level. 500k for 20% equity. If you have an idea, we want to fund it.

Whats your idea? please be as specific as you can.

$500k for 20% of an** idea**? You must be in SF!

"Out the garage is how you end up in charge
It's how you end up in penthouses, end up in cars, it's how you
Start off a curb servin', end up a boss"

    • 2
Mar 26, 2020
ironnchef:

i'm actually doing this. have partnered with a real seed VC fund...looking to fund new business at the idea level. 500k for 20% equity. If you have an idea, we want to fund it.

Whats your idea? please be as specific as you can.

Send me a message, it wont let me PM you. I can send you something to look at that's pretty much done.

  • Analyst 1 in Other
Mar 26, 2020

Will you sign an NDA?

Mar 26, 2020

VC firms don't sign NDAs...none of them. we get pitches from multiple companies pitching similar ideas, so an NDA would be a non-starter.

as is often said, ideas are a dime a dozen...they are worthless.

Mark Zuckerburg didn't come up with the idea for a social network...MySpace and Friendser already existed, and had millions of users.

Google was not the 1st search engine..it wasn't even the 10th.

Execution is more important than ideas. However, ideas start the conversation.

So, whats your idea?

    • 1
Funniest
Mar 29, 2020
ironnchef:

ideas are a dime a dozen...they are worthless.

ironnchef:

So, whats your idea?

nick young

    • 5
Mar 25, 2020

What type of tech company did you initially build?

Mar 25, 2020

Mobile games co. Was more of a side project while i was in school but it did fine and I learned a ton. Digital advertising wasn't as robust as it is now so CAC was super high and the space got super crowded with better funded and better designed games in 2011-2012 when iphone 4-5 came out.

"Out the garage is how you end up in charge
It's how you end up in penthouses, end up in cars, it's how you
Start off a curb servin', end up a boss"

    • 1
Mar 25, 2020
StrapYourBoots:

Is this all hypothetical or is this your situation?

It'll depends on the subject matter expertise of the person with the cash.

If it was me, I'd build out another tech company. $500k will get you to MVP and first customers, then raise more and scale. No inventory to worry about, operation costs are low in the beginning, sales costs can be managed and optimized, and you can convert leads digitally. I love the internet.

Lot better than spending $250k on opening a restaurant or brick and mortar where you have to worry about operations, overhead, employee turnover, fluctuating food costs, sanitation, licenses. insurance, marketing, supply chain, faulty product, etc.

Yea, super easy to build a tech company from a shitty MVP.

    • 1
Mar 25, 2020

I'm sensing sarcasm? Never said it was easy...

Depending on product and team structure your MVP shouldn't cost you more than 100k. If you do it right it could be done for far less. Might be kind of shitty but at least it's working. OP said you don't get salary so that's not included.

That leaves you with $400k more to get early customers, enhance the product, relaunch and market.

It sounds like you've had a bad experience launching MVP. I'm guessing development was outsourced, the contract sucked, over paid for under-delivery, and didn't have any technical team members that could take over the development.

This is the "easy" route and it never works. I've seen this happen way too many times.

"Out the garage is how you end up in charge
It's how you end up in penthouses, end up in cars, it's how you
Start off a curb servin', end up a boss"

    • 1
Mar 25, 2020

It looks like real estate in Texas is prone to massive price drops due to oil prices and Corona happening at the same time. It will be interesting how things shake up in the next couple months on the value of these properties.

Mar 25, 2020

KFC in South Chicago...enjoy

    • 1
Mar 26, 2020

Designer N95 facemask company catered towards sports and brands for mass events (like concerts). All these peeps going to major events will be wearing jerseys with matching facemasks into stadiums and arenas, as well as band branded stuff for concerts. I'd focus on getting those sorts of licenses first and then go to colleges and universities second. Boom you have a huge business.

Mar 26, 2020

I have some large art. Mostly oil on canvas. These pieces would go for around $10K apiece for my large pieces (5ft x 6ft, 5ft x 7ft, 3ft x 8ft). But, these are illiquid pieces that just sit on my wall with little volume.

I used to have some of these pieces in an NYC pad when I lived there and they got a lot views from the house parties, even by someone at Sothebys that noted they were of value. It definitely resulted in a couple commissions for large custom art pieces then.

I could ultimately crank out these large abstract oil on canvas pieces at a high rate if the demand was there to meet me. Gallery fees are 50% if you get into the gallery. So if I sold a piece for $10K there, I'd only get $5K.

My idea is to lease out a nice pad with good walls for large paintings (preferably a high ceiling entrance or living room), AirBnb it, and then put the big pieces there as 'free advertising' to get noticed by the people staying there and also to offer several incentives. The first incentive to those staying there would be a discount if they bought a piece. Maybe 10% off or 20% for pieces I really wanted to liquidate. Plus, I think they should get a commission if a piece sells while they are there. Maybe they helped broker the sale. Or hosted a showing. I could definitely offer a 10%-20% broker fee to them and still have more net profit than getting it in a gallery with 50% fees. This method would effectively eliminate inventory fees and gallery costs.

I'd probably prepare backup paintings the same size to just pop on the wall if the other painting was sold to keep up with demand.

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee

    • 4
Mar 26, 2020

What are the paintings normally of?

I've seen a version of this idea, slightly different, in some local restaurants where you have art all over the walls, from local painters, often of local motifs, places, etc. for people to purchase.

Very interesting concept.

Mar 26, 2020
Addinator:

What are the paintings normally of?

Its abstract modern art. Mainly oil on canvas. My signature piece is a triptych with a threaded rod through it. I like large scale though as well. The triptychs are nice though - they fit through doors and you can take them apart. My last 7ft x 5ft piece that I made (just one panel), I had to make sure it would fit out the door and onto the stairs before making the piece.

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee

    • 4
Mar 26, 2020

Nice artwork man! On this website I was actually expecting an artwork joke on money laundering / "tax donation" pieces, but this stuff is really lively and atmospheric!

SBed

Mar 26, 2020

LIHTC developer. You;re 500k covers pre-dev expenses and don't need additional equity.

Mar 26, 2020

Ugh, $500k isn't enough for my ideas. However, there is a really random, old idea I had that might work at $500k. Open up a small, tiny shop in a lower income area. The tiny shop has one employee working at any given time. You just buy gold and silver jewelry at 50% of the metals' market value, melt it down into silver or gold bars, and sell enough to cover your expenses. Stock away a fortune of gold and silver bars.

It's obviously not a super unique idea, but if I were pretty wealthy I might hire a few people to do that on my behalf so I could build up a fortune of hard metal assets.

Oh yeah, my former roommate showed me a cool business model: seasonal stores. He made really good money with a toy store that was open for 2 months a year during the Christmas season. I assume you could be open 3 months or so a year if you focus on Halloween, too.

Mar 26, 2020

Uber, but for your kids so parents can outsource quality time with the brats to other parents.

Kuber.

Give me my $500k

Mar 26, 2020

I think there's still a ton of needs in legal tech. Supposedly it's been a thing in the valley/startup world for a while, but I've seen absolutely zero reduction in legal budgets or wasted time and money by counsel (both internal and external). So somehow the economic value isn't making its way to the client yet. Not sure where exactly the break in the chain is. Probably a lot of places.

    • 1
Mar 27, 2020

Whippin' out my old notes (from 2013):

Looking at my notes, I've believed for a long time that autonomous vehicles will put pressure on commercial airlines' short- and medium-range flights and be the final nail in the coffin for rail in the U.S. because what will arise out of the technology is decked-out RV-type autonomous vehicles that will have kitchen, bathroom/shower, sleeping quarters and some open space with anything from massage chair to surround sound speaker system to OLED TV with satellite. They'll be used to go from LA to San Fran, D.C. to Atlanta, NYC to Chicago for business or D.C. to the Outer Banks or Charlotte to Nashville for vacation. People will be picked up by the vehicle at ~9 pm, they'll sleep the night in their vehicle while the vehicle does 95+% highway driving with minimal traffic, wake up near or at their destination and can take a shower and grab breakfast. Business travel, vacation travel, etc. will be revolutionized. Charge, like, $100 for a trip and absolutely clean up. Electric or hydrogen-fueled. No security, no insane ticket prices, no hotel cost, minimized awake time lost, no need to rent a car or grab a taxi at your destination. Routes and destinations strictly geofenced for insanely easy, safe routes (maybe initially drivers who jump in and take over when vehicle leaves the highway).

I'd like to build some prototype business/vacation-class vehicles and license out the autonomous tech from, like, Zoox or some similar company. Will probably need more than $500k. Like, $2M. But you could build an insanely profitable business or the prospect of one (lol). And because of how stupid valuation is surrounding AVs, get a prototype and a reasonable business plan and you'll get a stupid valuation regardless of the legal/technological practicality.

I have so many more crazy ideas!

Mar 27, 2020

go on

Mar 27, 2020

Let's hear more

Most Helpful
Mar 27, 2020

Ha, well, that $500k limit is a tough one and dashes a lot of my best ideas, but here are some of them that might fit the $500k limit. I have no problem pitching these ideas (anyone can steal them!) because I'm not going to pursue them. I'd love to pursue the autonomous vehicle idea I pitched, but realistically I'd just be happy if someone succeeded in that area.

1) I originally wrote this up and then deleted it, but my Hispanic friend does the best white trash impressions. He and I (and my Persian friend) had the joint idea of designing a teddy bear that says racist things (not super racist, just funny, ignorant things that a redneck stereotype might say) with him doing the voice. We call it Racist Bear. It would sell as a novelty. Obviously, the personalities could be expanded.

2) Reiterating the two above I pitched--the seasonal Halloween and Christmas store that is only opened 3 months a year--ya make all your profits really fast and close down shop (my former roommate did this and did well with it). Also, opening up small little cash for gold/silver shop, melting the jewelry down into bars and selling just enough to cover your expenses, thus stocking away hard silver and gold assets for well under market.

3) Drivers' education school. Weirdly enough, this can be a crazy profitable business. My friend's family are immigrants from somewhere in the Middle East and are killing it with this business.

4) A non-franchised indoor cycling studio. I wouldn't want to pay the franchise fee to be honest, because outside of maybe SoulCycle pretty much the location and instructors generate the revenue, so I don't see a bunch of benefit to brand name. But if you can keep your costs in check and are willing to pay the elite instructors big money, you can kill it in this biz.

5) At one point I'd have loved to have gotten into the dry cleaning business (not anymore, but I did!). But in this case I'd want a franchise tag under, say, Tide Dry Cleaning. Separate yourself with the very excellent brand name, employing college students who speak English, and by keeping it a clean cards-only business (no cash) for easy financial management. Do off-site cleaning, thus allowing for a small retail footprint (thus lower overhead costs for rent) and no environmental issues with your lease. I contacted Tide at one point and they told me to go fornicate with myself--not interested in my area!

6) Green installation company. On behalf of other companies, install, say, the Tesla solar roof, or geothermal energy systems, or natural pools, and similar products. These companies often want to expand faster than they can manage to acquire personnel and often lose business because they lack installation personnel in areas where prospective customers have contacted them. I'm actually licensed to do this stuff, but haven't pursued yet.

7) Nestle Toll House drive-thru only coffee shop in a highly trafficked area. People want their coffee badly from 5 am to 2 pm, shut down after 2 pm. Cards only (no cash), ensure your layout allows for a long line of cars to snake around your property, and hyper specialize in fast turn of orders. Also, make sure to select a lot that has great ingress/egress so not to dissuade prospective customers.

Frankly, my better ideas require much more money. Like, several orders of magnitude.

Mar 27, 2020

Voice-enabled patient exam rooms that listens to interactions between drs. and pts. The most important points the visit (diagnosis, prognosis and treatment) are transcribed in a simplistic UI with automated AI follow-ups to track the care plan.

Mar 27, 2020

We're gonna sublease large blocks of office space

    • 1
Mar 27, 2020

A fund with job creation as a primary focus, sounds government funded to me. This is the wrong forum for this, you should go to small business forums and see what sort of traditional businesses could be launched with a small amount of investment with a priority on early cashflow. Most tech ideas are going to be very risky, and will certainly need follow-on capital investment. If you want to go this route, you're better of doing what startup studios do and hunt for serial entrepreneurs, or domain experts, and equip them to build new ventures.

Mar 27, 2020

Real estate investment company.

Using the 500k as a down payment on a 2-3 million dollar property either corporate or 12+ unit apartment housing. Slowly build a real estate portfolio; buying low and selling high while making cash flow. In some cases you can find really good deals and flip houses in a few days to gain 30k-40k per flip. Not too bad for less than a week of work.
You make money in real estate when you buy not when you sell.
You just have to parse your data efficiently and you can make a lot in CRE and Multifamily units.
I know you said you cannot buy real estate buy, you could start a company that buys real estate.

    • 3
Mar 29, 2020

$500k is not nearly enough for reg capital, but doing a no-branch bank that funds itself exclusively or almost entirely through the brokered deposits market via CD's and invests into high quality mortgage pools and similar assets. Secondary line of business would be adding liquidity to the overnight/short term interbank/other financial company funding markets.

Govt backed funding base and govt/agency/ AAA credit backed investments, zero interaction with the general public and minimal regulatory issues.

Could so a relatively similar model with a life insurer and sell immediate pay fixed annuities instead of CD's. Less reg capital requirements for the insurer by far but it would have some level of customer/general public interaction.

Mar 29, 2020

Call up my petroleum well appraiser to buy interest in oil wells then sit on my ass and collect checks.

Array

Mar 31, 2020

Would you even consider me after my posts? Hehe

Mar 31, 2020

I'd start a roofing company. It's one of the only skilled trades that DIYers can't do on their own. Plus if you're good you'll eventually be hired by GCs to roof larger development projects. I'd use the $500k to:
1. poach a pro roofer and a few employees from a local contractor,
2. hire a marketing firm for initial naming and ad pitch idea (not 100% necessary though)
3. build out a proprietary scheduling/quoting software
4. get the website going
5. cover expenses for a year while we undercut competition to get our name out there.

Eventually expand into other markets or franchise out the name and scheduling software.
I got the idea from a family friend who bought an existing roofing business for about $3m and sold it a decade later for $35m.

    • 1
Mar 31, 2020
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