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MenuTo raise or not to raise?
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It's a shame you don't feel the fire in the belly for what you're doing but that happens.
Any Angel or small VC is going to want your absolute commitment to stay with the company. They RELY on your fire in the belly to make the company happen. So, there's a real potential conflict there.
Unless you're "In it to win it", I'd avoid an outside investor. That said, would it be possible to find a potential partner that could "buy in" to the company and ultimately take the helm? Even adding a minority partner that does have that fire and then finding an investor would be a better alternative than you have today.
There are ways to structure an agreement with a new partner that would allow you to get paid over time based on the company's success and with an investor (although there's virtually no investor that will want you to use the funds to pay yourself immediately).
The most important factor is to find a financial partner or investor who shares your objectives. There are VCs that are not afraid of management changes and who are seeking 2 to 4 year exits. The key is how you find your investor and the deal you set with them.
Another alternative is to find and groom a CEO to grow the company and hand over the reigns before seeking the funding. This way you position yourself more as a Chariman or non-executive director and can possibly have your cake and eat it,too.
Your lack of enthusiasm will be apparent to anyone you will want to raise money from. So, that is probably not a viable option.
I think the alternative of bringing in a partner who is passionate about what you are doing is a great idea. That sets up smooth transition for you to get out.
This will still take a while the bottom line is you can stay or leave whenever you want to, but as you have already clearly stated the amount you get out of it will depend on how long you want to stick it out. If the additional return you think you will get is worth it, stick around and make something happen. If not, cash out and move.
Hey there, I have raised a few rounds myself, got my butt kicked on others, and helped raise over $11MM for other startups.
Raising capital is very hard. It's emotionally draining, and it's a full-time job for awhile - the average round takes over three months. Which means... it's hard to do when you're not passionate about what you're doing.
I might consider this approach:
1) Fine-tune your pitch. Make it incredible! Exciting, passionate, and highlight your growth (I/others can help with this).
2) Then, take that pitch to two different audiences:
2.A) A potential COO/CEO/etc. See what kind of talent you can get to phase yourself out.
2.B) A few investors in your network you trust. Try and get a gauge on how difficult this round of funding will take.
You can use that "data" to help inform your decision.
Last note: some investors might actually be happy to transition you out of the CEO role. Not all, but some.
Hope that helps!
You can choose. Have a few millions, be completely free, enjoy the fuck out of your 20s + start a new company or have 10+ millions in 10 years. What would you like more?
Related Questions
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At what point should an entrepreneur give up on their venture?
I help B2B companies find their most profitable customers. This a tough spot with no cut and dry answers. I would ask the following: - There's a lot of things I could do, why did I choose to do this? Think of this as a gut-check to gauge whether you want to push through or not. - Define 'no traction' with customers. What was the reason they originally bought from you? What problem are you solving for them today? You can find this out by calling and asking. - Can I be cashflow positive just providing them what is of value? If you're getting positive answers to each of these questions, keep going. Not every products needs, or can have, a hockey stick-like growth chart with customers. Finally, I would pretend the $150k investment didn't exist and I still had the customers and product I have today. What would I do with the product? The more you invest in something (emotionally and financially) that harder it becomes to abandon it. This is known as the 'sunk cost fallacy.' Stepping away from it can provide much needed prospective. Feel free to give me a call if you'd like to chat more about your specific situation.AV
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What happens to a convertible note if the company fails?
Convertible notes are by no means "earned." They are often easier to raise for early-stage companies who don't want to or can't raise an equity round. Equity rounds almost always require a simultaneous close of either the whole round or a defined "first close" representing a significant share of the raised amount. Where there are many participants in the round comprised mostly of small seed funds and/or angel investors, shepherding everyone to a closing date can be very difficult. If a company raises money on a note and the company fails, the investors are creditors, getting money back prior to any shareholder and any creditor that doesn't have security or statutory preference. In almost every case, convertible note holders in these situations would be lucky to get pennies back on the dollar. It would be highly unusual of / unheard of for a convertible note to come with personal guarantees. Happy to talk to you about the particulars of your situation and explain more to you based on what you're wanting to know.TW
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Pre-seed / seed funding for a community app... valuation and how much to take from investors?
To answer your questions: 1) Mobile companies at your stage usually raise angel funding at a valuation equivalent of $5,000,000 for US based companies and $4,000,000 to $4,500,000 for Canadian companies. 2) The valuation is a function of how much you raise against that valuation. For instance, selling $50,000 at $5,000,000 means you are selling debt that will convert into shares equal to roughly 1% of your company. 3) I would encourage you to check out my other answers that I've recently written that talk in detail about what to raise and when to raise. Given that you've now launched and your launch is "quiet", most seed investors are going to want to see substantial traction before investing. It's best for you to raise this money on a convertible note instead of actually selling equity, especially if you are intending on raising $50,000 - $100,000. Happy to schedule a call with you to provide more specifics and encourage you to read through the answers I've provided re fundraising advice to early-stage companies as well.TW
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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.AJ
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How important is a co-founder when it comes to raising capital?
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