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Need to find a way to get funding

joshlrogersjoshlrogers subscriber Posts: 1
edited October 2007 in Startup Funding
So I have an idea for a business that is not exactly a novel idea but it is one that I believe would work very well in my community and across many communities.  My city is one of the fastest growing cities in the nation having experienced 100+ percent growth year over year for the last 3 years.  What is nice is that we are also a very young community.0
My idea is to open a cyber gaming cafe which in my belief would also bring gamers from the nearby metropolitan area.
However I have a few knocks against me:
Knock #1: I am 26
Knock #2: I have very little equity in my home as it was only purchased a year ago.
Knock #3: Never ran a business before
Knock #4: I have no start up capital
and finally Knock #5: I estimate a startup cost of around 310k for hardware, lease for a 18 months, data connection fees for 18 months, and self payment of 35k for a year (a substantial paycut for myself) and space preperation fees as well as estimated utilites for 18months
With such a high amount and bank financing, which I might not even be able to get with the above knocks mentioned, being typically a 5-7 year repayment term of between 6-9% interest I don`t conservatively believe I could make a go of it at those rates.
I believe I am being very conservative in my usage expectation, I am hoping to have 20 computers at a rate of 5 dollars an hour experience 2-3 hours of use a day averaging between 40 and 60 hours a day yielding 200-300 dollars a day.  If I am open every day excluding holidays that gives me an average of between 6000 and 9000 a month.
I am just trying to figure out how to fund this business.....if I even stand a snowballs chance.....
Thanks,
Josh Rogers
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    joshlrogersjoshlrogers subscriber Posts: 1
    well you could cut a ton of expenses if you only offered the place for them to play and drink coffee etc. By not supplying the machines, etc you could save a LOT. Once the place starts generating cash then add the machines etc.
    It is possible, but if I was going to go that route I would probably host lan events in my city and rent meeting room space to do that.  I want my market to expand beyond just gamers I want people who don`t have computers to be able to come in and do word editing, graphics editing, printing, browsing internet and so on.  So by not having hardware I`d be limiting myself and I wouldn`t be much different from the starbucks and saxbys I have in my area that already have wifi
    Thanks,
    Josh
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    joshlrogersjoshlrogers subscriber Posts: 1
    tikki and CFO,
    Thank you very much for your advice!
    CFO,
    I have a few questions I would like to throw at you if you don`t mind....
    As far as funds I can access, my family is excited enough about this idea they are willing to put in some money, but I would be surprised if it even got close to 20k.  My wife and I honestly just made sure we got out of any credit card debt or any frivilous debt and are moving to a cash basis only, we only have two car loans and the mortgage, but making that move also dwindled our reserves.  We have 2500 in stocks and 15k in 401ks but with the penalties and the fact I do not want to touch that, we really only have very little funds at our discretion.  We have about 50k in credit limit, but I am not daring to get into that until I start to see an income....maybe I am not as much of a risk taker as an entrepeneur needs to be but I need to feed my family.
    I am very intrigued by an advisory board, where would I find such professionals?  I can find a consulting firm I am sure, but finding a good consultant can be very much like finding a needle in a haystack, anyone can call themselves a consultant.  As well as there are costs associated with consultancy so how do I approach this?
    Having that type of return is where I am running into problems.....I don`t foresee being able to make that type of return in that short of time.  Even when I am not being conservative and forecasting a 25-30% growth rate year over year for the first 5 years I do not see a 10x return......I don`t even see being able to pay back the loan in 5 years....maybe I am not forecasting something correctly or thinking about something the wrong way.
    Wow $1M seems like overkill as well as I can`t imagine having that debt hanging over my head if my idea goes up in a puff of smoke.  As I said I may not be as risky as I think I am or should be but I don`t want to put a business plan together saying I should be making a million in revenue the first year, I just don`t see it and think it would be irresponsible for me to try and justify that type of number.  I am honestly forecasting only around 140k revenue at most the first year, and that may be aggressive, leaving a very modest profit margin if any after all costs associated with start up.
    Thanks,Josh
     
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    joshlrogersjoshlrogers subscriber Posts: 1
    BTW I don`t mean to sound if I am talking myself out of this, but I want to be prepared for everything, I am just that way.  I get accused by my wife all the time of foreseeing everything that could possibly go wrong, but never seeing all the things that could go right.  I pleade guilty.
    Thanks,
    Josh
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    txbassguytxbassguy subscriber Posts: 0
    i`ve seen ideas like this come up many times before. i even thought about opening up something like this about 10-15 years ago. if it was me - i`d concentrate on spending much less on hardware and more on making it a meeting place for lan parties, etc. computer hardware depreciates fast and goes obsolete much faster. one good idea would be for the hardware to be ps3s, xbox360s, all networked together. it just sounds like the 310k is a bit low -  as someone else mentioned - especially when you add in marketing expenses, general overhead, utilities, etc. i don`t foresee a profit for at least 3 years.
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    joshlrogersjoshlrogers subscriber Posts: 1
    I do agree the 310k is a bit low, those were done on very preliminary numbers, in which marketing and insurance was not taken into effect and neither was software costs.
    I know that hardware depreciates incredibly quick, but as far as becoming obsolecent I don`t believe it is as quick as many believe.  I have been working in the IT field for quite a few years, I am a software developer, and while moores law is still in effect, gaming has not really been able to keep up with that.  Popular games such as Quake are still quite playable on older computers.  Video cards are still one of the main components and with video cards that have 1.5GB of GDDR3 ram in them, I do not see any video game pushing that limit for quite some time, especially because manufacturers are now weighing graphics vs bandwidth.  We are coming to a time where if the bandwidth isn`t there it is better to sacrifice graphics as to have a smoother game play.  Most games still run on 128MB video cards which are quite cheap to come by these days.
    I foresee a profit before 3 years, but I do not see much of a return for investors, that is why I am leary and hoping to find something I am missing.  I know there are gaming cafes out there that are quite successful, so I assume I need to figure out what they are doing to be so successful.
    Thanks,
    Josh
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    Determined9Determined9 subscriber Posts: 0
    Forgive me if this is a silly question but how hard is it to learn to create a basic  "mini-game"
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    Determined9Determined9 subscriber Posts: 0
    Forgive me if this is a silly question but how hard is it to learn to create a basic  "mini-game"
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    robertjrobertj subscriber Posts: 0 Member

    I do agree the 310k is a bit low, those were done on very preliminary numbers, in which marketing and insurance was not taken into effect and neither was software costs.
    I know that hardware depreciates incredibly quick, but as far as becoming obsolescent I don`t believe it is as quick as many believe.  I have been working in the IT field for quite a few years, I am a software developer, and while Moore`s law is still in effect, gaming has not really been able to keep up with that.  Popular games such as Quake are still quite playable on older computers.  Video cards are still one of the main components and with video cards that have 1.5GB of GDDR3 ram in them, I do not see any video game pushing that limit for quite some time, especially because manufacturers are now weighing graphics vs bandwidth.  We are coming to a time where if the bandwidth isn`t there it is better to sacrifice graphics as to have a smoother game play.  Most games still run on 128MB video cards which are quite cheap to come by these days.
    I foresee a profit before 3 years, but I do not see much of a return for investors, that is why I am leery and hoping to find something I am missing.  I know there are gaming cafes out there that are quite successful, so I assume I need to figure out what they are doing to be so successful.
    Thanks,
    Josh

    Josh,
    I think your best next step would be to gather more information about those other gaming cafes to see if your assumptions are sound. I would also suggest doing some "preliminary" market research.
     
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    johnqhjohnqh subscriber Posts: 4
    Josh...
    I don`t get it - you want to have 20 computers but you expect each to be used for only 2 to 3 hours per day?
    Then why not have only 5 computers and have each one used for 8 to 10 hours per day?
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    SidneywahSidneywah subscriber Posts: 0
    I wonder how practical it would be in today`s society to create a place for internet gamers to meet and play.Bear with me here, but considering that computers and the internet are becoming more and more accessible each year.  I see it as an inconvenience to leave home just to talk games and play with other gamers online when you can do the same thing in the convenience of your own home.On an entire different note, you did acknowledge several knocks that rang home for me. 

    One of the biggest hurdles I faced as I tried to make my
    business a reality was how to convince a lending institution that my business
    would make enough money to repay the requested loan amount.  The bottom line is that I found out, in each
    attempt I made to acquire a small business loan, that collateral is one of the
    biggest setbacks most entrepreneurs and small business owner have to face and overcome. 



    I found it very difficult to convince any bank that my home-based
    business could be a tremendous success, if I could acquire the resources I so
    desperately needed to get things on stream. 
    The fact remained that my efforts were fruitless.

    I have used www.thesnaploan.com with success.I couldn`t tell from this thread what the exact figure is you will need to start your business.  However, I do know that thesnaploan.com offers up to $500,000, 100 percent unsecured with a credit score of 675 or higher.Perhaps, you could give them a shot.
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