Funding - Series A

Hello, So usually; at least in my opinion, the best search for funding follows validation from the market, a certain amount of recurring revenue and proof that business works (and can scale). Do you have these?

I don't think there's a right—meaning, sane—answer here. How much capital do you think you'll need over the next 4-5 years? Series A? Series B? So on? Some, but not all, institutional investors will take a look at a cap table made longer by crowdfunding the way kids look at a pool that's been peed in. They might politely decline to hop it. I don't say that to scare you, but just so that you'll be aware. Totally agree with Owen's point: it might make sense to raise LESS money with a MORE strategic investor. One dollar with Investor B might have more long-term value, in the form of introductions or domain expertise, than the same dollar from Investor A. Regardless, ask yourself this question: what is the absolute minimum we need to raise right now? Now multiply that times 1.5. Then, figure out a Plan A, B, C, and D for getting there. Plan A might be a big influx of cash. Plan B might be a mix of cash and some business development from a new advisor. Plan C might include minimal cash, a new channel partner, and a few big contracts. Plan D might be a pivot or hopping into bed with a manufacturer to cut your costs. Happy to discuss more if you'd like. Get in touch! Cheers, Austin

I like the way you framed this question. Staying calm, always leads to better decisions being made. The best way to maintain a "calm" state is to do your best to look at your business from a completely detached view. Having a talk with myself or anyone else well-reviewed on Clarity can bring needed perspective, but some people can achieve the same analysis on their own. Questions you should be asking yourself: 1) What evidence do I have that I'm building something others need? Was I expecting to have more evidence than I currently have? If so, do I trust that I know how I can obtain this evidence within the next 30 days? 2) Do I have credible options to fund what remains to be completed to get real customers (not my friends or associates) to use the product and give feedback? 3) Are others working on this project with me willing to make the necessary sacrifices (deferring payment) to get us to the point where we can test with real customers/ If you're not scoring at least 2/3 with confidence, you should reach out to me or someone else on Clarity.

Hello! This is a very good question, my name is Humberto Valle, and I'm the founder of www.Unthink.me a small globally known inbound marketing agency. We have helped many tech-related companies such as Software Developers who work on equity as well as traditional payments. For our marketing agency, we have also taken equity in combination of 'cash' payment. So yes, there are many opportunities for startups to hire or partner with an individual or agency on equity. The trick, I would assume is where in your lifecycle do you approach someone to work with you/for you for equity promise? At the end of the day, marketing agencies are not a hail mary approach to growing or making a company sustainable - its all about management and strategic market fits - if your plan is to hire an agency to have them do what you want, you may not find anyone who would be interested, possibly not even for payment. It is very understandable that you want to save your burn rate but you have to be respectful of someone's skillset - for example you mentioned doing 75% equity and the rest based on results - so commission? A good established marketing agency is not in the business of a startup, so unless they have a CEO who gets distracted, any good leader will not take on 'external opportunities' from what they are doing right now - aka a marketing agency won't work on hopes and dreams - which is what this is right now. As a business owner, startup entrepreneur and leder of your team you have to make critical decisions and hiring and spending on marketing is one of them. For example, I would consider myself to be globally recognized ( not a lot but decently enough) on topics that revolve around marketing strategies - my suggestion to you would be to look into marketing agencies and hire them directly while you are also focusing your expertise (is it manufacturing? logistics? sales? what is it? focus on that and outsource/partner the rest such as for example you could look for an existing expert in cosmetic distribution or connections at some of the larger retailers, give them that structure (% equity + commission %) butkeep that that equity to a minimum (don't offer, ask for them to value their own worth and negotiate from there)

Before I get to your question, let me give you a tip: always aim settle questions of payment before the work happens. It is ten times easier to agree on a price beforehand, and having done that doesn't stop you from changing it by mutual agreement later. The problem with paying cash is pretty obvious: you don't have a lot of it. The problems with paying equity are subtler. The first one is that early-stage equity is extremely hard to value. A second is that equity transactions require a lot of paperwork. Third is that entrepreneurs tend to value their equity much higher than other people would; if not, they wouldn't be starting the company. And fourth, people like designers are rarely expert in valuing businesses or the customs of of startup equity valuation. In the past, I've both given and received equity compensation, and it's a lot more of a pain than I expected. In the future, what I think I'd try is convertible debt. That is, I'd talk with the designer and agree on a fair-market wage. E.g. 100 hours x $100/hr = $10k. The next time we take investment, the $10k turns into stock at whatever price we agree with our investors, plus a discount because he was in before the investors. Note, though, that this will increase your legal costs and your deal complexity, so I'd personally only do this for a pretty significant amount of work. And I'd only do it for somebody I trusted and respected enough to have them around for the life of my business.