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MenuIf I don't have a co-founder but have a minimum viable product, how do I get investors interested in my idea and eventually my company?
Company Stage: idea - prototype stage.
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First, congrats on getting to MVP stage!
Second, since you have a minimum viable product - what you need at the moment isn't investors or cofounders - it's users!
I'll strongly urge you to spend your time getting your product in front of your target users, and gathering feedback diligently.
Validating your MVP with users will be a requisite step in attracting investor attention - rare is the startup that can raise funds without some user level traction, even rarer still is the startup that nails its product without user feedback and sails happily to market.
Gain some momentum and some learnings by getting your product into the hands of your users, your need for funding may be eliminated, or change drastically as you start to steer based on real market conditions and not intuition.
I am as solo founder and successfully raised three Angel rounds.It can be done.
Investors want a list of attributes to properly litigate their risk involved for first time entrepreneurs. Namely, you need to demonstrate you are sharp, expert in your field, have 'skin in the game', a cleary focus, understand market and contingincies. If you don't have a team, be honest and transparent that the funds can be utilized to outsource extra help.
What I recommend are the following suggestions
-Have a beautifully designed pitch deck
- Basic mockup website
- Social content following
-Master your presentation skills
If you have a proof of concept have solid numbers, google analytics/trends of your market share and competitors in a business plan start scheduling meetings. I can send you two links of a pitch deck I used to raise 40k and a video I frequently use as a reference to what angels look .
Firstly, you don't need a co-founder but it's highly recommended, investors on the whole will trust a team of co-founders more than a single founder. The reason is that statistically co-founding teams are much more successful than single founder teams. Why bet on a company, even with a great idea, that has less chance of being successful.
Having said that you can find investors who will bet on you, it's just a case of kissing lots of frogs.
If you have an MVP, you need to use it to validate your assumptions. That does not mean that you need to get 100,000 users on board. You need enough users to show average usage. I'm not a statistician but depending on your customer base your sample of users could be 10 (B2B - enterprise) to 10k B2C mass market.
Proof points would be:
* stickiness - how often the come back and use it
* conversion to sales
* NPS - would they recommend the product / service to a friend?
* there will be lots of other specific qualitative and quantitate proofs that will be specific to your product
It should not take you long to put this together in a presentable form and take it to investors.
Happy to help you further on a call, including working out specific KPIs or proof points.
We would all like to think, "If I build it they will come." But this is not necessarily true. 100 years ago, if you build a better mouse trap investors would beat a path to your doorsteps. But not now. What you need to do is mount a two prong marketing campaign aimed your target user audience or clients and also at your investors. Use language like, "Select Investors invited to Inquire." Not the exact words, but you get the point. Don't beg if you have a MVP.
Best of Luck,
Mike
From the Trenches to the Towers Marketing
Related Questions
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How important is a co-founder when it comes to raising capital?
I'm a single founder who was raised angel and venture capital. If your business is compelling enough, you could raise angel funding. But there is little chance you can raise venture funding without a team in-place. It's a negative signal to institutional investors that you haven't been able to lock down a committed team. That said, depending on the nature of your product and traction, it sounds like you might be past the stage of recruiting a cofounder and more into hiring a great team of employees. The differentiation being less title and more the amount of equity. It sounds like you are selling a physical product so the question is whether you have built the capacity to scale. If not, the importance of having someone on your team who has done that at scale, even at the angel level of funding, could be helpful if not required. Happy to do a quick call and give you more contextual advice.TW
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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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Pre-seed / seed funding for a community app... valuation and how much to take from investors?
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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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When raising money how much of equity do you give up to keep control? Is it more important to control the board or majority of shares?
It entirely depends on the kind of business you have. If you have a tech startup for example, there are pretty reliable assumptions about each round of funding. And a business plan and financial forecasts are almost totally irrelevant to sophisticated tech investors in the early stages of a company's life. Recent financial history is important if the company is already generating revenue and in that case, a twelve-month projection is also meaningful, but pre-revenue, financial forecasts in tech startups mean nothing. You shouldn't give up more than 10-15% for your first $100,000 and from that point forward, you should budget between 10-20% dilution per each round of subsequent dilution. In a tech startup, you should be more nervous about dilution than control. The reality of it is that until at least a meaningful amount of traction is reached, no one is likely to care about taking control of the venture. If the founding team screws-up, it's likely that there will be very little energy from anyone else in trying to take-over and fix those problems. Kevin is correct in that the board is elected by shareholders but, a board exerts a lot of influence on a company as time goes-on. So board seats shouldn't be given lightly. A single bad or ineffective board member can wreak havoc on a company, especially in the early stages of a company's life. In companies outside of tech, you're likely going to be dealing with valuations that are far lower, thus likely to be impacted with greater dilution and also potentially far more restrictive and onerous investment terms. If your company is a tech company, I'm happy to talk to you about the financing process. I am a startup entrepreneur who has recently raised angel and VC capital and was also formerly a VC as part of a $500,000,000 investment fund investing in every stage of tech and education companies.TW
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