$450k for 10% - yay or nay?
Dose $450k for 10% at 4.5 million per money valuation, with no board seat and a chance to secure a government contract through the investor’s network sound like a good deal?
A little about us:
✅ We are https://plutio.com - one app for everything a freelancer or a small business need in one place.
✅ We have built a brand people love, and an extremely innovative app freelancers rely on from all around the world, and a strong community of evangelists.
✅ Currently at $13,000 MRR.
✅ Made $250k (5000 sales) in a week when we launched with AppSumo in 2017.
✅ Processed over $10 million in invoices.
✅ Growing organically through affiliates and word of mouth.
✅ We are profitable.
✅ We are a remote team of 3.
✅ The gig market is huge and estimated to be worth around 1.5 trillion.
I’ve been bootstrapping Plutio for 5 years now, and it is going well but slow, so the idea is to take the money to help Plutio scale.
What do you think?
If you trust the investor, absolutely.
$4.5M pre-money on $156k of annual revenue (roughly) is, if my math is in the ballpark, ~29x revenue. That's an incredible multiple, no matter what your growth rate is.
If you have a solid plan on how to use that investment, and the investor is someone you think you'd like to work with, take that deal all day.
Thank you, my thoughts exactly!
I've put together a plan of how we will use the money and I think we're 90% moving forward with the investment, fingers crossed.
Best of luck! Look forward to the follow up post
Thank you!
What's the MoM growth rate? That's the most important metric that's being left out.
As of now, it is around 4% MoM
@leobassam Hi Leo, are you looking to hire more freelancers?
Most likely, very soon!
@leobassam Thank you.Please email me on mmdesignsldn@hotmail.com to discuss further.
https://www.plutio.com/work-with-us
Lol I feel like you should be reaching out to Leo, the CEO wouldnt email you for a role.
Unrelated to the topic, but your product is pretty cool. How does it compare to Bonsai or and.co?
Thank you so much! Made my day hehe - Plutio is a more powerful, more customizable, and more community oriented version than Bonsai and And.co - you should give us a go! Keen to hear your thoughts :P
If it's $4.5 million pre, then after $450k investment, you've got a $4.95 million post-money valuation. The $450k should only buy 450000/4950000 =~ 9.1% not 10%.
Oh, damn... I'm not sure how to go back to the investor and say that now as we've agreed to 10% at 4.5
I want you to be very specific about exactly what you agreed to.
Did you agree to "10% at a $4.5 million pre" or "$450,000 to buy 10% at a $4.5 million pre".
If you agreed to "10% at a $4.5 million pre", then the math is clear: They should be writing you a $500,000 check. 4.5 million + 500,000 = $5 million post-money valuation. The $500,000 check = 10% of post-money valuation. They now own 10% of your now-$5 milllion company.
The key thing: have you already agreed to the size of the check, or just the pre-money valuation and the amount of equity they're buying?
If you agreed to "$450,000 to buy 10%", then you don't have a $4.5 million pre-money valuation, you have a $4.5 million post-money valuation. The difference is that your remaining 90% of the company just dropped in value from $4.5 million to $4.05 million. Resolving this is theoretically worth $450,000 to you. Talk to a lawyer who specializes in this area.
In general I'd say yes - In my past company had accelerator funding for 250k at 10%... In the long term we felt that the real value was the networking rather than the cash. A good VC firm can open doors that is really hard to access from the outside.
Thank you! The investor is aiming to help us sign a few large contracts which will change the game for us, so I'm hopping this investment isn't only about them money.
It does seem a fair price (clearly, I don't have the money :D).
Seeing what you want to use it for, I'm not sure you would need that much $. Why don't you try to hire and pay from your existing MRR (maybe + a bit of equity)?
How will taking the money help you scale? What are you going to do with it that you can't do with the little money you have now?
Hire people to help with onboarding and retention.
We get heaps of signups but few conversations and when we ask why they say we just can’t figure it out... it is a nice app but can’t figure it out.
I can’t be talking to them because I won’t have time for anything else! I tried.
I still do support now and I struggle with that and product development.
I don’t think we need to spend anything on ads because we really do get good traffic, but our retention needs work to scale.
It doesn't sound like you actually need 450k, but instead a single sales representative would also already help you out a lot. If you're growth has been slow yet steady until now you should also question yourself if you are up for spending a lot of money to grow quicker.
Obviously do it if you think it's the right thing and you have a plan but if it's just to hire a few people 10% is a lot!
Good luck.
sounds like you have good plan for the money. can't make the choice for you, a cost benefit analysis of taking the money or not should hopefully guide you in your decision. best of luck.