I'm the founder of a new startup and currently bootstrapping the operation. By the way of luck, we have potential interest from an angel investor, but should things not work out, I'm wondering when is a good time to look for funding?
Most of the incubators that I've seen are looking for startups with full teams already. I'm set to attend a few startup events hosted in our city, but not really sure of etiquette and what to ask for, but see great value in just meeting established people in the industry nonetheless.
We're outsourcing our MVP and I've just hired a few associates working piecemeal for me when required. The prototype will be done by me.
At this stage in time, I have a full time job and this is a part time operation.
Thank you so much for your time. I would value consulting with some of you over phone.
Exciting stuff! I see a few questions here:
1. When is the right time to look for seed funding?
2. How do I appropriately talk to angel investors about said funding?
As for the first question, consider what your goals are and whether this funding can help you achieve those goals. Hopefully, one of those goals is to step out of your full time job and concentrate on this project full-time. It's perfectly acceptable to be doing this on the side, however, you'll find it VERY difficult to get any sort of funding unless your plan is to "quit your day job" the minute you accept your first bit of funding.
If you think some amount of seed funding will help you accomplish your goals short term (perhaps getting to prove out product-market-fit and position yourself to scale), then I would say that you're ready to begin talking to investors when you're able to articulate what your business is, your plan for getting to product-market-fit, AND you can visually show them something. Whether this is your MVP or a visual demo of some sort -- be at a point where you can *show* them your product.
In terms of how to position yourself to potential angel investors:
I'd specifically seek out people in your area that have something to add aside from just money. Angel investors invest money, yes -- but they also invest their time, knowledge, and connections. At this stage, you need this just as much as the money (whether you realize it or not). Position the meeting as "getting feedback." Meet with as many people that fit this mold as possible. You'll start to get a sense -- very quickly -- for who is a real potential angel investor for you, and who is not.
I'm happy to talk things through with you more, if needed. I hope that some of this helps...
An angel investor is likely to want to:
(a) See that you have thought about the desired profile of the other cofounder, who will complement your skills, and who you'll need to attract to the startup. Even better if you have identified a few potential candidates.
(b) A plan for you going full-time in this venture.
(c) Some kind of feedback from the potential market that you are solving a real problem, and some market sizing analysis (even if it is very rough).
At startup networking events, go prepared with a 30-60 second elevator pitch about your startup to gauge how people react to it, and who shows interest in follow-up discussions.
Happy to talk more on the phone with more details (e.g. whether it is a B2B or B2C venture), so the suggestions could become more specific.
Also, please feel free to check out some of my other answers (on my Clarity profile): e.g. what investors look for in a technical cofounder, etc.
Mahesh & Mike have both given good answers here. I'm writing only to underline and expand the potential issues they've raised that you will likely encounter.
By way of background, I am a non-technical solo founder that raised a great angel round based on a solid MVP. I'm also an active angel investor myself so can talk from both perspectives.
The point about being part-time is a real issue. What it says to investors is you might be lacking a real commitment to your own cause. So let me make it clear: IMO, you're not ready to really raise from great investors until you yourself are all-in.
The difference of a couple of months of you living and breathing this will undoubtedly improve your odds of raising successfully and also give you time to complete your MVP.
You *can* raise money with a great MVP and no full-time team but you will often run into the "team" objection. You can get a lot done with contractors (I relied on them a lot in my early builds) but the inability to attract a co-founder or CTO or other senior tech resource raises the potential flag. From an outsider's perspective, the concerns range from "does this person have hidden personality issues" to "is (s)he not convincing enough or lacking credibility with tech people?" to "they don't have enough hustle to get a team, so how can they hustle to win their market" and so on.
A single angel investor does not fill an angel round. If this person believes in you and what you're building, that's great. It might even make sense (depending on the terms) to take their money now *but* I *guarantee* that the best thing for you to say to this person is "hey, I'm going to quit my job and really fully explore this for the 30-60 days and really make sure we're on the right path. Would you mind if I come back to you then to discuss your interest?" If I were in your shoes, that's what I'd do.
Leaving a full-time job and plunging full-time is scary and not an easy decision and not for everyone. Happy to talk with you about how to evaluate this with a bit more clarity.
The key 2 parts to when you should raise money comes down to:
1. Do you need to raise money now? If your business is revenue generating from the early days then you might not have to raise money right at the beginning?
2. Are you ready to raise? Most investors want to see a launched product with traction and some growth numbers. For early rounds you want to prove that people are using it and its working out well. If you have the numbers to show that you are growing well and that users enjoy using your product then you are much more likely to raise.
With regard to your second point, its very hard to raise without having a full time team as investors will see that you are afraid to take the risk of dedicating yourself full time to a company so they will usually pass on the idea.
You want to show that you are dedicated to the business and that your team is. With all the requirements of running a startup its more than a Full time job so its going to be difficult to convince investors that you can compete in the market when you are not fully committed.
I have 25 years of experience working with early stage technology companies and investors.
I’m often asked about fundraising strategies for VC funds and angel investors. After raising capital and exiting from multiple startups and investing through 15 venture funds and dozens of angel investments I have seen thousands of deals.
I’ve found that the most productive use of time for both of us is scheduling a call through my profile.
