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  1. #1
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    I always hear big sites have their own investors... but how does it work?

    Imagine you have a great idea for a site (or a site already running) and you want to find an investor to put money into your idea... For example, free sites such as Digg.com and stumbleupon.com both are fueled by big investors... but how does it actually work? I have a few questions (hopefully not too stupid) regarding this....

    1) Where to find such investors? Are there actual people looking to invest their money in web projects?

    2) What does an investor expect in return? Imagine you have a web project, but you're not on any stock market with your project (or not yet...). What are the advantages for the investor? How does he earn his money back?

    3) What exactly does a site do with the money they get from an investor? They spend it on advertising and employees and such?

    4) What if the project fails? Is this a risk an investor takes, that he could lose his money?

    5) Do you know any other, small and big sites, that are sponsored by an investor?


    Discuss

  2. #2
    Life is short. Be happy today! silver trophybronze trophy Sagewing's Avatar
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    Ideas aren't worth much unless they are 1 in a million. Build a prototype that is first to market, unique, and compelling and you can shop it around for funding. Shopping an 'idea' is so difficult that it's almost impossible.
    The fewer our wants, the nearer we resemble the gods. Socrates

    SAGEWING LLC - QUALITY WEB AND MOBILE APPS. PREMIUM OUTSOURCING SERVICES.
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  3. #3
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    Quote Originally Posted by Sagewing View Post
    Ideas aren't worth much unless they are 1 in a million. Build a prototype that is first to market, unique, and compelling and you can shop it around for funding. Shopping an 'idea' is so difficult that it's almost impossible.


    Thanks, but that was not what I was asking.

  4. #4
    Life is short. Be happy today! silver trophybronze trophy Sagewing's Avatar
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    Yea you are right. I was just trying to make a useful comment since your questions were very broad. Let me try again:

    1) Where to find such investors? Are there actual people looking to invest their money in web projects?

    There are angel investors, VC's, and then random things like family investors, etc. There are networking events for this kind of thing, and people are pitching their dotcom ideas to investors all the time. Yes, there are large numbers of people/organizations who investing in online businesses (not a website, not a project, but a business)

    2) What does an investor expect in return? Imagine you have a web project, but you're not on any stock market with your project (or not yet...). What are the advantages for the investor? How does he earn his money back?

    It depends on what you have to offer, what you bring to the table. If your idea is fantastic, you have great business skills, and just need some cash to turn the key you can get money without giving much equity away. If not, you may have to part with big chunks of equity to make it worthwhile for an investor.

    3) What exactly does a site do with the money they get from an investor? They spend it on advertising and employees and such?

    This depends on the business. An ideal investment would be one that already has a great team, a great plan, a great beta/prototype, and a great marketing plan that just needs to be funded.

    4) What if the project fails? Is this a risk an investor takes, that he could lose his money?

    Sure, they are risking they money by investing in a startup. That's why they will want a lot in return.

    5) Do you know any other, small and big sites, that are sponsored by an investor?

    Yea, a significant percentage of them are. Businesses like Facebook had early investors, and if you look around on the web for venture capitalists you can sometimes see their portfolio of sites. It's very common.
    The fewer our wants, the nearer we resemble the gods. Socrates

    SAGEWING LLC - QUALITY WEB AND MOBILE APPS. PREMIUM OUTSOURCING SERVICES.
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  5. #5
    SitePoint Wizard silver trophy
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    The very short answer to your question: People invest in businesses for the opportunity to make significant returns on them at the risk of losing it all. And this happens every day to the tune of billions and billions of dollars. But your question is not on one point, rather it could be summed up as: explain venture investing. That's a big topic.

    While site administrators here, and others can speak volumes to this topic and offer great insights from personal experience, trying to explain the entire process from purpose to action is just not the best way to get the information you're looking for.

    There are many blogs and sites that talk about investing that can give you a base understanding of this market from which to dive into specifics. And don't limit yourself to the web either, much of what you're asking is just basic business investment strategy. Heck, you might even find watching the Social Network helps.

    http://en.wikipedia.org/wiki/Venture_capital
    - Ted S


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