How long does it take Ridgecrest to decide whether to invest in a deal?
If you send us a short Business Plan or a well-conceived email describing your funding needs and business, we’ll give you a preliminary answer in 24 hours or less. We then institute a period of fact-finding that can last from 1 to 3 weeks, depending upon the completeness and complexity of your Business Plan. We typically make a final decision within a month. The size and complexity of the investment also govern the time period that we need to review your funding request. Frankly, we prefer “simple” investments in business areas with which we are already familiar so that we can react fast.
How much money does Ridgecrest typically invest in a single deal?
This depends primarily on the nature of the funding requested. When we purchase a small service business, for example, we may invest as little as $50,000, while real estate transactions can require $1,000,000 or more. However, the majority of our investments are in the $100,000 to $300,000 range, frequently invested over time as the need arises.
Is Ridgecrest a lender or an equity investor?
We both lend money and purchase equity, and we prefer to do both. A critical element, however, is our interest only in acquiring complete control of a business. We therefore are not strictly a “lender,” unless we lend funds to the business in conjunction with our purchase of a controlling equity interest.
Does Ridgecrest invest only in Central Maryland businesses?
We consider ourselves an active partner in those businesses in which we invest, and we like to be geographically close to our partners. Our offices are in Frederick and Hagerstown, so we tend to invest in Frederick and Hagerstown area enterprises. We have not as yet made a major investment in a company that is located outside of our current region. That said, however, several of our Central Maryland-based investments have expanded well beyond their home office.
What return does Ridgecrest expect to make on its investment?
We expect to earn approximately 10% compounded annually on an unleveraged investment or loan. For more risky equity investments, we would expect to triple our investment in five years. Our strategy is to accept a lower rate of return in exchange for a lower risk profile when compared to the returns sought by other venture capital investors.
Does Ridgecrest have standard guidelines for an investment?
Each investment is different, and thus our terms differ in every deal. As a general rule, however, we typically purchase assets rather than equity; we expect to collect current interest or a management fee on our investment; and we rarely assume existing debt or other company obligations, including employment contracts or leases.
How actively does Ridgecrest manage its investments?
Although we invest in a company primarily because we trust the people managing the business and approve of their business model, we are active partners with these managers. We believe that we bring expertise as well as money to any venture in which we choose to invest, and we expect management to take advantage of our experience and skills.
What can I expect Ridgecrest to do if I do not meet my Business Plan objectives?
We’ll begin by offering suggestions, but if management can’t solve the problems, we’re not opposed to replacing even the most senior people in order to protect our investment. We are not passive investors!
What percentage of a business does Ridgecrest normally buy or control?
We expect to be a substantial stockholder, possibly along with the business’s operating manager. We are typically the only “outside” stockholder and will want to own at least 75% of the business.
List some circumstances that are most conducive to Ridgecrest deciding to invest.
We invest to help businesses expand and not to help them pay off past debts. The best circumstances would be for us to invest so that the business could make an acquisition, open a new office, or expand their current product line. We expect to see a profitable business model and an experienced management team in place before we invest. An ideal investment would also enable us to leverage our expertise in an industry with which we are already familiar, such as those described on our Opportunities pages.
Does Ridgecrest invest in only selected industries or situations?
We invest only in smaller companies or real estate projects. We prefer industries that reach a break-even point with 50% of their capacity filled and thus generate very high incremental profits when they fill the rest of their capacity. Just as important, our businesses must have a sustainable competitive advantage.
Are there industries in which Ridgecrest will not invest?
We stay away from technology ventures, and from most wholesale businesses. In service businesses, because we invest in smaller companies, we also avoid industries that can benefit significantly from economies of scale that might be available to our competition. Finally, we also avoid capital-intensive businesses or industries that are going through very rapid changes.