Ask a millionaire what they look for in a business investment opportunity and inevitably they will tell you low risk, high reward. Periods of hyperinflation, have always seen huge increases in the prices of investment grade fine art. This would allow you to invest in a business with a set of other people so that you do not become a primary source of money. Stating that the company needs a $ 20 million investment, but not revealing the key assumptions in your financial model, will interest the few people to your project.
There are approximately 1,400 publicly-traded companies that offer shares directly to investors. Your financial calculations in your business plan therefore need to be thorough and accurate and presented with confidence. It’s important to make sure your business is in a sound financial situation before taking that risk.
If they do hold a lot of shares in the business, they are more likely to hold a vested interest in making sure the company works, rather than siphoning off money for their salary which could happen. The fact is that, even though people are not perfect rational beings, in reality, they do not even take the time to do the full scope of an analysis of which they are capable.
The formation of the Exchange is part of the government’s economic reform programme aimed at developing the financial and capital market in order to support and enhance private sector initiative. Many of these are mom and pop retail investors playing with their retirement money, and there are also many who invested with their life savings.
But it comes with the risk of being wrong for a looooong time and at some point being forced to cover or lose more than the initial investment. Investor must have a plan to protect his money. Thus you have no say in how people use your money and have no options to prevent the business from potential failure.