About Jim D. Ray Expertise Jim Ray is coordinator of a regional venture capital network, serving entrepreneurs and investors seeking funding relationships. Ray is an experienced entrepreneur and is presently involved in the operations of several business concepts, including a national commercial real estate company and a web design firm. Areas of expertise include the overall startup funding process; writing venture capital proposals; and win-win exit strategies for existing private funding relationships.
Expert: Jim D. Ray Date: 10/25/2004 Subject: Investor pay back on investment
Question Ray,
I understand that figuring the return on investment, (ROI), can be a very complex issue depending on the type of investment, etc. I would like to know, generally speaking, how to determine the ROI on an investment, not so much as how much to offer but in how it's paid back.
Does the investor get a certain percentage in equity stake and participate in profits? Or, does the investor get his money paid back first, then participate in profits from an equity stake?
I hope there's some sense to this question. If I'm off or missing anything, please elaborate.
Thanks in advance,
Bill Thomas
Answer Thursday, October 28, 2004
12:38 AM CST
Hello, Bill:
Excellent question! Let's get right to it --
Determining your ROI schedule depends on the agreement between you and the investor-partner. If this is a lending institution (bank), the terms of repayment will be fairly specific in regard to schedule and amount, as defined by the bank. If the lender is a private investor, repayment terms may be more flexible in duration or amount, depending on several factors. In dealing with private investors, each agreement is as unique as the investor him or herself.
If you are currently in negotiations with an investment party, I recommend speaking with an attorney in the state which you will operate. Your attorney will have additional insight, that will ensure the terms are both favorable and legally acceptable.
Bill, I hope this information helps point you in the right direction. Should you think of other questions or need further guidance, please feel welcome to write me again anytime.
