Loading...
Answers
MenuWhat's harder, creating the opportunity or financing it?
I successfully pitched two major players on a game deal with an established team and a proven sales record. Half of it is financed, and I'm looking for the other half. Everyone I talk to says what I've done is the hard part and financing the rest is the easy part. I have not found the money and I risk losing the deal. I can't crowdfund because the players in this deal don't want to risk credibility. What don't I know, but should?
Answers
Personally, I have always found harder to finance and than creating opportunity.
It is quite "easy" (once you have the right value proposition and target customers) to sell but getting paid is way more difficult. Most small business are dying not because they are not selling, but because they are not getting paid early for their work and finally lacking liquidity for their operations.
So funding is a bit like getting paid in advance.
What we usually do is split the total bill in bits to be paid out gradually based on progress and well defined target.
I have seen your situation before with other customers. What they did was to start developing the product with the budget they had focusing on the most interesting part and then they went with this half finished but functional product to pitch investors. And this how they got the missing part of the funding.
You need to target seed stage investors who like to "follow." Your current investors act as validation for your idea and deal. Investment is a game of knocking on the right doors versus sales, which is just knocking on a lot of doors. Ask around your network for investors that have done similar deals in the past to what you are proposing. Connect with them and gauge their interest and what they'd be able to bring to the table. Keep up meetings and provide updates, getting them excited about what you're up to. Presenting at a game-centric Angel Forum is another avenue.
You literally have done the "hard" part, you have a lead investor. You've made it where 99% of venture-backed businesses don't. However, getting people to part with large sums of money still takes time, they need to trust you will do well with it. Keep talking to seed stage investors who have funded ideas like yours and you'll get there.
I'm a believer in shoestring start-ups so I would be creating a situation that would have investors seeking me out. You need to get yourself out there in front of as many people as possible bragging about your great new product so that investors call you. Let me say this an investor who called you is worth at least 10 times one you phoned. One your in charge and your looking for the best investors, the other your one of a hundred people calling them and they are looking for the best investment, which position do you want to be in. How do you have them clamoring to your door is get some minimal, viable version of your product or service so you can show some real figures, real buyers not just a hypothetical possibility of success. Call me for more on this, thanks....Ken Queen
Financing is the hard part, not the easy part. You need to get yourself out there in front of as many people as possible bragging about your great new product so that investors call you. One you’re in charge and you’re looking for the best investors, the other you’re one of a hundred people calling them, and they are looking for the best investment, which position do you want to be in.
You can read more here: https://www.uschamber.com/co/run/business-financing/business-financing-challenges
Besides if you do have any questions give me a call: https://clarity.fm/joy-brotonath
Related Questions
-
VCs: What are some pitch deck pet peeves?
Avoid buzzwords: - every founder thinks their idea is disruptive/revolutionary - every founder says their financial projections are conservative Instead: - explain your validation & customer traction - explain the assumptions underlying your projections Avoid: - focusing extensively on the product/technology rather than on the business - misunderstanding the purpose of financial projections; they exist in a pitch deck to: a) validate the founders understanding of running a business b) provide a sense of magnitude of the opportunity versus the amount of capital requested c) confirm the go-to-market strategy (nothing undermines a pitch faster than financial projections disconnected from the declared go-to-market approach) d) generally discredit you as someone who understands how to build a company; for instance we'll capture 10% of our market, 1% of China, etc. Top down financial projections get big laughs from investors after you leave the room. bonus) don't show 90% profit margins. Ever. Even if you'll actually have them. Ever. Instead: - avoid false precision by rounding all projections to nearest thousands ($000) - include # units / # subscribers / # customers above revenue line; this goes hand-in-hand with building a bottom up revenue model and implicitly reveals assumptions. Investors will determine if you are realistic, conservative, or out of your mind based largely on the customer acquisition numbers and your explanation of how they will be achieved. - highlight your assumptions & milestones on first customers, cash flow break even, and other customer acquisition and expense metrics that are relevant Avoid: - thinking about investor money as your money - approaching the pitch from your mindset (I need money); investors have to be skeptics, so understand their perspective. - bad investors; it's tempting to think that any money is good money. You can't get an investor to leave once they are in without Herculean efforts and costs (and if you're asking for money, you can't afford it). If you're not on the same page with an investor on how to run/grow the business, you'll regret every waking hour. Instead: - it's their money; tell them how you are going to utilize their money to make them more money - you're a founder, a true believer. Your mantra should be "de-risk, de-risk, de-risk". Perception of risk is the #1 reason an investor says no. Many are legitimate, but often enough it's simply a perception that could have been addressed. - beyond the pitch, make the conversation 2-way. Ask questions of the investor (you might learn awesome things or uncover problems) and talk to at least two other founders they invested in more than 6 months ago.Jason PlimlJP
-
What exit strategies do angel investors want/prefer for a service business?
Keep in mind that investors invest for returns. Telling a prospective investor that you want his or her money to grow your business but don't plan on ever generating a liquidation event that pays him or her a dividend is not likely going to work; angel or not. You may be better served with debt financing where returns are generated in the form of interest payments not equity value growth. BUT, if equity financing is the plan, you're going to want to develop a strategic exit plan right from the start. That means identifying prospective buyers, strategic channels etc and characterizing the value drivers for each right up front. You'll find prospective buyers come in a number of forms; competitors, bigger versions of you, strategic partners, private equity, etc. Each will value your business in different amounts for for different reasons. Understanding this is vitally important for you to navigate to securing the right money, from the right sources, with the most favorable terms. Once you've qualified and quantified each of them, then determine what (specifically) you're going to need to do to align your business with those prospective buyers generating the highest returns. This will drive your business model and go to market strategy and define your 'use of funds' decisions. This in turn result in a better, more valuable business whether you exit or not. Do it this way and you'll have no trouble raising money from multiple sources. You can learn more about the advantage of starting with a Strategic Exit plan here: http://www.zerolimitsventures.com/cadredc Good luck. SteveStephan LittleSL
-
What is the average cost to close a round of seed funding?
I'm reluctant to say "it depends," but legal expense for a true seed round varies dramatically based on: 1. Whether the investment is structured as a priced equity round vs. convertible debt (or variations on that theme such as "SAFE") 2. Number and location of investors, timing of closing(s), and prior angel investing experience 3. Company counsel's efficiency and fluency in industry norms 4. "Deferred maintenance" necessary in areas like corporate formation, founders' equity issuance and IP assignments. #4 is the item that takes many entrepreneurs by surprise. On the investor side, it leads otherwise very savvy observers to give unrealistically low estimates of legal expense because they assume starting from a clean slate. This item is also most resistant to automation or standardization because startups come into being many different ways; each story is unique. I would put the lowest estimate at around $3K, assuming the company is already formed as a Delaware corporation with clean, basic documents, has issued founders' stock and handled related IP and other matters, and simply needs to issue a convertible note to one or two accredited investors with minimal negotiation of documents. The highest I would expect for a true "seed round" is about $15K, where some corporate cleanup is needed, the deal is structured as a streamlined kind of preferred equity (e.g., Series Seed), there are multiple closings with investors on different dates and terms, etc. Beyond that point we're really in "Series A" territory, doing things like creating a full set of VC preferred stock investment documents (about 100 pages), negotiating with investors' counsel (at the company's expense), and so forth. The expense and complexity of a traditional Series A deal have been the main impetus behind using convertible debt or Series Seed-type documents for seed-stage investments of less than $1 million or so in recent years. I hope this proves helpful. Always happy to chat and answer further questions.Antone JohnsonAJ
-
How much equity is typically taken by investors in a seed round?
From my experience I would not advise you to go with Venture Capital when you're a start-up as in the end they will most likely end up screwing you. A much better source for funding would be angel investors or friends/family. The question of how much equity should I give away differs for every start-up. I remember with my first company I gave away 30% because I wanted to get it off the ground. This was the best decision I ever made. Don't over valuate your company as having 70% of something is big is a whole lot better than having 100% of something small. You have to decide your companies value based on Assets/I.P(Intellectual Property)/Projections. I assume you have some follow up questions and I would love to help you so if you need any help feel free to call me. Kind Regards, GiulianoGiuliano SeneseGS
-
Does anyone know of a good SaaS financial projection template for excel/apple numbers?
Here is a link to a basic model - http://monetizepros.com/tools/template-library/subscription-revenue-model-spreadsheet/ Depending on the purpose of the model you could get much much more elaborate or simpler. This base model will help you to understand size of the prize. But if you want to develop an end to end profitability model (Revenue, Gross Margin, Selling & General Administrative Costs, Taxes) I would suggest working with financial analyst. You biggest drivers (inputs) on a SaaS model will be CAC (Customer Acquisition Cost, Average Selling Price / Monthly Plan Cost, Customer Churn(How many people cancel their plans month to month), & Cost to serve If you can nail down them with solid backup data on your assumption that will make thing a lot simpler. Let me know if you need any help. I spent 7 years at a Fortune 100 company as a Sr. Financial Analyst.Brandon DolsBD
the startups.com platform
Copyright © 2025 Startups.com. All rights reserved.
