Acquiring Capital from Investors
Hey all, thank you for the warm welcome upon joining recently. I had a question I didn't see posted in the forums so I thought I'd ask here.
I'm now 80-90% complete with my startup but it has become apparent that personal funding/bootstrapping is no longer reasonable, as the podcast tour I've booked reflects top entrepreneurs/influencers, I wouldn't be able to release the startup without an A+ stamp of approval from a responsiveness/design perspective.
I am on the fence as it relates to requesting/acquiring capital from investors I know and I think more current information would help with moving this along and making a decision.
My question is, how standard is the 50K for 20% deal for capital as it relates to tech based startups. Programmers eat 50k for breakfast. My thoughts are something more along the lines of 5% for $100K/5yrs with the goal of being acquired/exiting within 2 years/possibly raising rounds pending how it goes, but again, it seems numbers are all over the place when I research this.
Should I be looking at a larger amount for 20% from 1 investor and keep it simple? It's obviously difficult to explain to non code investors that you're opting out of the 5 year plan for the 1 year growth hacking plan instead.
Would love to hear some solid info as it relates to this seemingly niche world, or how to approach a wealthy friend who has bored money from successful investments! Part of me also has a difficult time reasoning taking such a "large" amount of capital from someone I respect with the possibility of failure, though seems somewhat unlikely at this point. 100K also might be a drop in the bucket for these people who wouldn't die if the investment failed, so I may be overthinking this as well.. I have tech friends who can help answer this but it will be a few weeks before I see them and wanted to come prepared, if anything.
Thanks IndieHackers!
Have you thought about alternative ways to fund your business (outside of venture capital)?
Do you mind sharing what's "alternative"?
Financing options that won't require you to give up ownership or control of the business.
E.g. There are traditional debt-like products:
There are emerging investments firms offering :
If you're looking for something outside of debt:
Also other opportunities like:
Btw we're building a platform (fundstory.com) to help founders access and manage these alternative options.
Do you have any traction? Pilots?
I don't know what your dev requirements are, but I would suggest you try using no-code tools and website builders depending on your needs (e.g. Carrd, Squarespace, Webflow, etc.) rather than hire a developer to build your site at this stage. It's very possible and even easy to build a responsive, well-designed site/app using these tools. Once you launch and potentially get some revenue, it will be easier to raise funds if you really feel you need developers to get to the next stage.
If you are following the Indiehacker route (as opposed to VC route), then you may want to consider alternatives like Earnest Capital and Tiny Seed.
Before you reach to investors, just to ask you - how many customers do you have (beta customers, waiting lists, etc)? Also, if investment fail, it fail, everybody who might give you money calculate on this risk so it's not something your should worry.
Try to find Angel investors, they are usually reasonable with their demands on percentage. If you live in a country that supports startups, you can check for governmental schemes, that would avoid giving away equity at all, e. g. the EU currently throws money at everything that has "covid19" in the business plan. Another option is to approach pre-seed/seed VCs, but they are rare and usually ask for a warm-introduction, meaning someone they know and trust need to introduce you to them. Hope that helps
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The second one works better , or you put it like "Covid19 software platform for corona-related Saas and Covid19, covid!!!!" ;-)
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