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MenuWhen to ask for funding for your startup?
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I think if you're going to pursue a studio approach, you should assume that you will not be able to raise much in the way of outside equity funding.
Most investors do not want to invest in a team that is pursuing multiple projects at the same time for a variety of reasons.
To the extent that any of your apps have demonstrated any kind of initial traction, there is a reasonable chance that you can recruit competent growth professionals who could be compelled to take a big portion of upside, but I'd caution that true experts (as defined by people who have done it more than once at 100,000 plus users) would rather do this for their own app or be a cofounder in the overall venture so be careful about professionals who present themselves as experts who are all too willing to venture for a largely performance-driven deal.
With regards to proof points for funding, assuming you want to abandon all others in favor of the one that gets the most traction, I've written several related answers here on Clarity about the benchmarks for angel and seed funding so I encourage you to review my profile and look at previous answers. If you'd like to talk by phone, I'm happy to help.
John Doerr, principle at Kleiner Perkins, often says "A true entrepreneur delivers more than expected for less cost than expected". You want to raise money when you understand your market/product well enough that the money funds an assured plan for growth. The plan will have risks and challenges, but you want the money to fund things you have validated in the market place, not supposition.
Specific to social networking in early stage, a market of 1,000 active users is more meaningful than 10k inactive users. It is hard to get a good venture firm to invest if you have less than 20k active users. Growth/user acquisition cost is a key factor in gaining smart investor attention.
The conversation you want to have with the VC is:
"Based on the use patterns of our X,XXX users, we see our network doubling every 60 days and revenue per user growing 30% each month. The funds we are raising allow us to expand this model to 100,000 users, to achieve average revenue of $XX/user/Month growing at 10% CAGR in year 2 and 3."
First of all the answers above are great. I say...give it away and get feed back from 1,000 users. What would they be willing to pay for the app if they had to pay? If you can't give it away, you likely cannot sell it. But, if you can demonstrate a need and more importantly a desire for the app you will probably be able to get funding. Then the more important question becomes do you want funding and how much equity are you willing to lose.
Michael T. Irvin
NoHogWashMarketing.com
"Get To The Top Without The Slop"
michaelirvin.net
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Looking for guidance for where I can find investors for my app?
As Ken suggested, there is a wide breadth of mobile offerings and although there are some great "mobile only" funds, each investor / fund has their own thesis that makes them interested in some but disinterested in others. Also, if your revenue generating, you should seriously consider bootstrapping further. Revenue is treated very strangely in early-stage investing and *might* work against you. AngelList is a great way to research investors but not effective in actually connecting with them. Find investors who you are confident will be passionate about what you're doing based on prior job experience or what you know they are investing in. Happy to talk in a call to help explain this further if you need more clarity.TW
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As a startup, is it better to find a way to pay for services (i.e. design) or trade equity for it?
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.WP
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