"Investors working together for mutual safety and benefit."

1) VRI members locate investment projects that sound good to them. Whether or not VRI can successfully negotiate the opportunity for the VRI club members, the requesting member will get valuable insights to assist him in making up his mind as an individual investor.

2) VRI member forwards the investment project to VRI for due diligence examination and negotiation according to the principles outlined below.

3) If the Company and VRI can agree on terms, a ‘No harm no foul’ contract is negotiated according to the terms outlined below.

4) The re-negotiated contract is placed on the VRI Closed Forum, available only to VRI investment club members.

5) VRI members discuss the project, giving input based on their knowledge of that particular business, and/or their knowledge of the individuals involved. Potential participants are encouraged to direclty contact the Company and walk through the same due diligence process as VRI has. If the potential investor comes to a different conclusion we want to know about it and encourage them to post it on the Closed Forum, so we can all discuss it.

6) If VRI members reach a consensus that it the opportunity is worth pursuing, the investment is opened for investing. Participation is voluntary.

7) All funds are collected in an investing entity owned by the VRI participating members, with bank accounts, created for that purpose.

8) No funds are turned over until the total amount necessary to initiate the business is collected.

9) If members fail to fully fund the opportunity, the contract with the company is cancelled (No harm, no foul).

*10) If enough funds are collected, VRI acts as a trustee funding the Company by direct paying the Company’s developmental costs upon presentation of proper billing.

11) VRI makes sure the Company is in compliance with securities regulations.

12) VRI maintains contact with the Companies, reporting as events occur to the VRI participating members though the VRI Closed Form.

Does this mean an investment opportunity is 'gauranteed'? No of course not. The equation in investing is always Investment ='s Risk. If you are looking for high returns with little or no risk, this is not the place to be. Such investments do not exist although scam artists try very hard to convince you this is possible.

It is always important to understand the risks of an investment before deciding whether or not the investor can do a 'cost/benefit' analysis. That is, decide whether or not the potential returns are worth the risks.

Below is an discusson of risk and how the VRI investing terms and criteria address them.

*Note: Every investment failure, whether from fraud theft or not, has one thing in common. A 'misuse' of investor money. 'Direct pay financing' lets the investors know how their money is being spent...and puts an entrepreneur on notice that the investors are looking over his shoulder, so he can avoid the common psychological quirk of thinking 'the money is in my account, so it must belong to me, and I can spend it however I wish'. This forces the entrepreneur to spend every dollar on developing the company and creating ongoing profits. That is good for the investors. And good for the entrepreneur.

VENTURE RESEARCH INSTITUTE (VRI) is a club of investors, started in 1993, who are interested in start up (otherwise known as venture capital) private placement investments.

The VRI investment club in effect functions like a Venture Capital Company, financed by individual club members, who forward investment opportunities to VRI. VRI then exercises the due diligence and applying the investing criteria noted below.

The OPEN FORUM of the VRI investment club is an outgrowth of the investment club activities in an attempt to moderate the FBI estimated $40 billion a year in telemarketed private investment fraud.

In the theory that an educated investor is better protected against fraud VRI has compiled over 12,000 companies and tens of thousands of individuals who have had SEC, FTC, CFTC, other agency and private lawsuits, and Cease and Desist Orders filed against them. As well as companies that have undergone VRI’s own due diligence analysis as a potential VRI 'group investment'.

Besides tracking repeat offenders, VRI hopes that in reading the fraction of the VRI posted online on ‘what went wrong’, as well as articles on fraud, that enough education will rub off on those investors to insulate them against further fraud.

VRI BACKGROUND

VRI started up in 1993 as INVESTOR DATA EXCHANGE. The name change occurred in 2001 when the club changed from a ‘due diligence’ club to a ‘venture capital club’ – and has grown from its initial 30 members to 1,500 members.

In a decade and a half of study VRI has discovered private investments have an astounding 90% failure rate.

MAIN CAUSES OF PRIVATE INVESTMENT FAILURE

1) FRAUD – Investment fraud accounts for approximately 30% of the private investment failure rate, as noted above approximating $40 billion a year.

2) INCOMPLETE BUSINESS MODELING – Many honest entrepreneurs use a ‘build it and they will buy it’ business modeling. No attempt is made to determine whether or not the public is willing to purchase the projected product or service and what price they will reasonably pay. Even large companies (who should know better) use ‘cost plus’ pricing rather than engaging in a marketing study to identify the end users of the product and what they would pay.

3) INCOMPETENT MANAGEMENT – There is a big difference between developing a product or service and developing a company that can sell the product or service for ongoing net profits. Management incompetence results in a ‘misuse of investor proceeds’ from constantly reinventing the wheel, and spending $4 where $1 would do.

4) MISUSE OF INVESTOR MONEY - Entrepreneurs often unconsciously (or consciously in the case of fraud) assume that if the investors money is in the company account then it is their money. This can lead to even initially honest entrepreneurs using investor money to play ‘catch-up’ with their own finances. Investors often bitterly learn that unaccountability on the use of their money all too often leads to the entrepreneur putting a down payment on a beach house, buy a Mazarati (or other such nonsense), and only trying to develop the company with what is left over of investor financing. Not surprisingly this results in a company failure due to under capitalization.

5) UNFAIR TERMS – Most companies seeking investor money believe that the company, and/or it’s principles, deserve the lions share of the profits and/or equity. In comparing project profits to projected investor profits VRI discovered that in 70% of the private investments VRI has studied the terms were so lopsided in favor of the company - even if the company achieved its profit projections - the investors would lose money. In addition, the money actually received from investors was never enough to complete the start up of the company, so the company raised more money from other investors often diluting the initial (and highest risk) investors down to negligible ownership in the company.

ADDRESSING THE FAILURE POINTS OF PRIVATE INVESTING

No matter how much due diligence is exercised, the main risk in private investing is that once the due diligence is finished and the investment money is turned over to the company there is no guarantee that the investor money will be spent ‘as advertised’, which usually leads to a catastrophic company failure.

To address this and the other failure points noted above VRI has had to first break down private, or start up, investing into three categories.

In addressing the failure points, it should be noted that these terms cannot be achieved by individual investors, unless they have enough money to fund the whole thing themselves.

It is only by a lot of smaller investors working together can the following terms and conditions be achieved.

LOW RISK/LOW REWARD

These are basically loans to a company usually paying investors 8%-25%. Loans to start up companies run the risk of a 100% loss if the company fails. Effective 2002 VRI will only lend if the company has collateral sufficient to secure the loan. The ownership of the collateral has to be able to be signed over to the VRI investing entity created for that purpose.

MEDIUM RISK/MEDIUM REWARD

These would be true start up investments where the company and the investors share the risk and therefore should equally share the rewards of the potential success. Typically VRI will not agree to buying stock in start up companies. The reason if the company succeeds, but without going public the investors have no exit strategy and have effectively made the company a ‘no interest loan’ that never has to be repaid.

The company has to provide objective evidence there is a market for its product or service; such as marketing (potential gross profits) and infrastructure (potential gross expenses) studies; current sales; customer surveys; or any other such studies.

Therefore VRI requires a business partnership with a net profit sharing. To determine the investors fair share in a start up VRI compares the previous money (cash not sweat equity) invested in the company, to the amount required by the company to full engage in selling it’s product or service.

For instance, if the previous company investment is $1 million, and the company requires another $1 million, the profits from net sales would be split 50/50 between the company and investors. If the ratio is $2 million in previous cash investing in the company, to $1 million required by investors, the profit splitting would be 75% to 25%.

After the appropriate investment amount, and the investors fair share, are calculated, and assuming VRI members agree to provide the appropriate investment amount, the company’s development costs are covered by DIRECT PAY FINANCING. The financing money is accumulated in an account set up in the investors name, and the company’s development expenses are ‘direct paid’ out of that account upon presentation of appropriate billing. This can include the company’s internal personnel and other expenses.

HIGH RISK/HIGH REWARD

These investments are ones where the requirements above are waived. However, a great deal of due diligence is conducted prior to any investment to make sure the project is legitimate. Anyone can say you might make 30 times your money. Proving the potential is really there requires the same objective evidence noted in Medium Risk/Medium reward investments above.

Such opportunities come along very rarely, and in 14 years the VRI members have only engaged in two. The first failed, the second is still ongoing.

JOINT EFFORT

VRI views any such investing as a joint effort between a company and it’s investors, wherein the company is the ‘production partners’ and the investors are the ‘financing partners’ with the investors having the full rights that any other business partner would have.

To that end after a potential investment meets the VRI investing criteria and is re-negotiated to become a true business partnership, all of the steps and facets are posted in the VRI CLOSED FORUM.

In the CLOSED FORUM club members can review the investment potential, post their own comments, ask their own questions, and discuss the potential risks and rewards among themselves, with VRI staff, and even the principles of the company seeking financing.

These discussions usually end up altering the terms of the investment contract, to possibly even canceling the investment completely, based on a ‘no harm, no foul’ section of the re-negotiated contract.

LOOKING FOR MR. GOODBAR

The fact is in our experience since 1993 – the VRI club members not only are invaluable in adding their input to a potential investment – but are equally invaluable in finding those potential investments in the first place.

All of the most successful VRI club investment have come from club members, who personally know, vouch for, and can assist VRI in interfacing with the principles of the company or entrepreneurs.

NO ONE PERSON KNOWS EVERYTHING

Look how often Wall Street firms screw up, and they have a lot more due diligence capacity than any one person.

To full assess a private investment you have to have the skills of a) a securities expert, b) an attorney, c) an accountant, d) a degree in business, and e) know a hell of a lot about the kind of business you are investing in.

These combined talents don't often come wrapped in one person's skin.

The VRI staff is not going to sit here and tell you what a ‘good’ investment is. As a club member YOU are as valuable in deciding what a ‘good’ investment as VRI is. To not take advantage of the investors own experiences and knowledge in that selection process would be foolish.

Even if an investment potential you send to VRI is not selected as ‘group investment’ the process of contact, terms examination, and negotiation with that company may help you decide whether or not you wish to pursue that investment individually.

GUARANTEED?

Does this mean that all this work put into every investment selected through this process will succeed?

No. We sure wish it would, but the word investment is the definition of risk no matter what anyone else may tell you.

What is important is to discover what those risks truly are, as well as the potential rewards. That way everyone goes into the investment with their eyes wide open, and therefore can gauge how much money to risk to a particular investment.

At VRI we believe individuals matter, and if you join the club someday it might be your individual voice that might mean the difference between success and failure.

Yours truly
Bernie Bicoy
President VRI

Please note that obtaining a username and password for the Open Forum does not automatically enroll you as a VRI member.

If you wish to become a member fill out the following form and email it back to VRI MEMBERSHIP FORM REQUEST

VENTURE RESEARCH INSTITUTE, INC.
22865 Lake Forest Dr., Lake Forest CA 92630
Main Access Page http://www.vcresearch.info/open/forums.asp
Email inquire@investordataexchange.com
Phone 888-339-7407 Fax 949-859-3480

INVESTORS WORKING TOGETHER SINCE 1993

“Why Should You Lose Money to Learn The Lessons Thousands of Other Investors Have Already Paid to Learn?”

VENTURE RESEARCH INSTITUTE: VRI is a private Investment Club where members can submit private investment opportunities for professional due diligence before investing hard earned dollars. The VRI membership works together to:
a) avoid fraudulent investments, or those that offer unfair terms to investors
b) exercise full disclosure of the risks as well as the rewards of a private investment, and
c) locate private investment opportunities that conform to commonsense investment contract terms for investors, renegotiating ‘’group investments’’ for VRI members to reflect a true partnership terms of capital and labor

VRI ARCHIVE FILES: Those that defraud investors will keep repeating their actions. The archives help us to spot them when they reappear. The sources for the VRI archives files are direct VRI due diligence for club members at their request; regulatory actions; news stories and direct investor feedback.

LEGAL RESTRICTIONS: VRI is happy to coordinate and release public information. But some of the information in the archive files are private due diligence on investment opportunities presented by VRI members. By securities law this information can only be released to VRI members.

VRI MEMBERSHIP: To 1) discuss the information you requested, 2) submit future investments for VRI due diligence, or 3) explore other courses of action such as tax write offs, please finish fill out the following information and email it back to VRI.

MEMBERSHIP DUES: No dues or sign up fees. VRI asks for a $20 contribution from each new member to support the VRI anti-fraud Open Forum. This contribution is strictly voluntary.

BECOMING A VRI MEMBER: Just fill out the information below
Name:
Street Address:
City, State, Zip:
Phone:
Fax (if applicable):
Email:
Date:
Enquiry:

If you have any questions regarding a VRI membership please feel free to call me personally.

Bernie Bicoy
President VRI