Startup Funding July 29, 2020

[ques] How can I get funding without giving away a piece of my baby?

Dinakar @Dinakar

I'm new to startup and funding. I have the slightest idea on this, mainly because my projects were self funded where the revenue from a project will go into a new project or get's reinvested in the same.

I'm working on a mobile application. I have already hit the roof and will soon hit my reserves. I can launch this project and support it for 5 months without marketing spends. I can barely support it for 1 month if I spend on marketing which is needed.

I don't want the time I have spent on it go into nothing, that's where funding can help but the problem is, with funding I have to give a piece of my baby to recieve funding and to support my business?

I'm working on a video sharing app (entertainment) by the way. I have been planning this for a long time and now is the best time to think about it.

Founders write about your funding experience here

  1. 5

    Is it more important for you to make this app big, or to own 100% of it?

    Thinking strictly in financial terms — if selling 20% helps you get to $100k ARR, that’s a lot better than keeping all of it and only getting $10k ARR.

    1. 2

      OMG this is the most valid point that hitted me hard now.

      Now I better sit down and think about going with an investor and make a meaningful decision.

      Thanks a lot for educating me.

  2. 4

    By "funding" without giving a piece of the pie, you are basically asking for how to get a loan. One suggestion already posted was a bank. There are other places you can get loans but the best ones are people you know: family, friends, acquaintances, maybe that restaurant owner that you know who has some money stashed away. I always keep people who have money in mind in case I should need to ask them to invest in any of my businesses.

    You'll need to show them some projections, agree on payment terms including interest and a payback time frame. Also, what happens if you can't pay them back in time? Good luck!

    1. 1

      I was also thinking of applying for a bank loan or just borrow money from friends.

      But to get investor-level money, a bank will ask me to submit loads of security in the first place. Unsecured loans will be so low they run out before even my business turns profitable and I'll be in debt and pain. Friends are just broke!

      1. 3

        Just give it a decent thought. If I lend you the money, what do I get in return? Your word that you'll pay back?

        Have you at least already validated your assumption that you would get investors? Because in your description it sounds like you built something without a business plan. Have they already valued your business? Go again to the bank and ask for a reversible loan (heck, mortgage your house, if you trust your business).

        1. 1

          I'm working on a short-form video-sharing app for India. As you might know, TikTok was banned this month, now UI mockups from Dribble are now having 1K+ downloads (users thought it's an app). That's how much validated the idea is. But that is the problem, anyone can reach 1K+, that's it, they (or me) won't be able to support 1K users uploading videos for more than 2 months.

          To get more users is where the competition is, it is literally blood in the streets with all the TikTok clones. I definitely value this, I don't wanna be just-another-clone with the project I worked on for months, so I'm working on other side hustles or ways to generate funding for this project. Hope it'll work out.

          1. 3

            If you have time pressure, forget about owning 100% of your baby. I'd say get funding and other teammates on board immediately.

            Think about 1 or 2 years in the future where you look back and tell your past self you have been late to the game, but at least you have tried it.

            Which would you regret more, loosing total ownership of your baby, or loosing the market? Make sure you pick one answer, not two, because you will, anyhow.

  3. 2

    Sounds like you're looking for non-dilutive capital here are some options:

    💵Term Notes
    🎖Grants
    🤝Revenue Shares
    🏦Credit Lines
    💳Business Credit
    💰Cash Advances

    Disclosure I'm the co-founder of FundStory.com

    1. 2

      Thanks for shedding light on that. Signing up!

      And what's the business behind Fund Story? How are you guys profitable?

      1. 1

        No problem! We charge the lenders on the platform a referral fee and we're testing premium features like:

        • Financial forecasting to better predict cost of capital for revenue share agreements and merchant cash advances.

        • Tailored recommendations based on your funding target and preferences.

        • Budget allocation tools to optimize ROAS post-funding!

        1. 2

          I first thought Fund Story is a blog publisher, who just publishes posts around funding topic. Only when I read more I came to understand what Fund Story is about.

  4. 2

    Become your own angel by creating and selling tiny, fast-to-ship products and high-margin services. Use what you earn to build the bigger thing one brick at a time.

    https://stackingthebricks.com/be-your-own-angel-a-revenue-model-for-slow-startups/

    1. 1

      Wow, this is nice Alex. I'm trying to work on some side hustles to fund this Video app project. Also, looking at other ways to fund this as well, like loans, family, revenue from other projects reinvested here. Hope something will work out.

      1. 1

        The main thing is to be strategic! Small wins add up faster and more reliably if you work with an investment mindset https://stackingthebricks.com/failure-the-hourly-mindset/

        Think of each step is buying yourself time to build the next, more profitable step. Over and over and over.

  5. 1

    These are the common ways by which startups raise their capital -

    • Investing own money.
    • Debt financing.
    • Borrowing from friends and family.
    • Investment via Govt. schemes.

    and of course • Equity financing; which you are apprehensive about.

    Each of them have their own pros and cons; which you can find here - https://hitstartup.com/how-to-raise-the-capital-for-our-startup/.

    1. 1

      Thanks Abishek, 1 and 3 looks so familiar. Have to check on the other options.

      1. 1

        They are are totally different, the attached link had further details.

        Investing own money means what it says i.e. Your money, your money could be from savings, sale of assets etc.

        Borrowing from friends and family is their money, you will have to return it some how , usually with interest. There have been successful companies which raised their capital this way, paid their friends and family fixed amount every month.

        1. 1

          Thanks Abishek for breaking it down once again.

          I just said that I'm familiar with investing my money and borrowing, I did not say they're similiar/same ☺️

  6. 1

    Offering lifetime deals - this way you're essentially selling your software at a discount to gain customers while getting some "funding" for your SaaS.

    1. 1

      It's not a SaaS project. It's an entertainment app, a short-form video sharing app for Indian users. The model is supported by ads.

  7. 0

    open the door > walk in the street > find a bank > enter

    1. 3

      Here in India, the type of money banks give is just not worth it for a decent startup. Only if you submit high enough securities you'll get an investor-level funding.

    2. 1

      or find clients right now

      1. 1

        This is an entertainment app. I edited the post now and mentioned it.

        Plan is ad supported, so will need good amount of users to become sustainable.

        1. 0

          build something people wants + the cooler brand in the industry. Then funds will came

          1. 1

            Sounds great but doesn't help him. Your post is recommending he should invest his time while he was asking how to fund his time.

            1. 1

              Yeah, it does sound great but does not help much. I just replied to aqui_c here to let know where I'm headed with this.

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