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Your thoughts on TinySeed & Earnest Capital?

Today, I was listening to Bright & Early podcast, hosting Tyler (the founder at Earnest Capital). Some of the benefits and support sound good.

Why wouldn't you apply for funding with these companies?

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    Each response to this question will need to be taken in context. To that end: I took funding for Summit from TinySeed in batch one.

    There are right and wrong situations and timings for each startup. In general ... these investors are great for post-revenue, pre-seed funding to buy you the chance of growing much faster because you can now focus and be strategic (do things in the order that maximizes long term value rather than chase the next buck from the next willing customers).

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    I don't know about Tiny Seed.

    Earnest is based on the assumption that 90%+ failure rates in the VC world are caused by massive funding and all the consequences (hiring and growth at all costs) and that business can have a lot higher success rate.

    I totally agree with the premises and that's the reason why I wouldn't take capital from Earnest.

    If you business ends uo being successful, you will pay 300%-500% the funding you got from Earnest and, in case of additional funding or a sale, Earnest stake in your business can reach 40%.

    Both the aspects of the contract are negotiable, but still make it a lot worst than a bank loan if you are confident in your business (and I would never take a bank loan).

    In my opinion, the alternative from best to worst are boostrapping, VC, bank loan, and Earnest, with bank loans and Earnest as alternatives I would avoid at all costs.

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      Thanks for the insight.

      The numbers look crazy high. I wonder this is the case with Tiny Seed as well. According to their website, they ask for equity.

      Seems like bootstrapping is still best option for indie makers.

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        I've been studying the terms of the alt VC's for over a year and do not know how you would get to 40% ownership on a SEAL. I wrote a comparison by the numbers here: https://medium.com/swlh/alternative-funding-calculus-a-quant-comparison-of-tiny-indie-and-earnest-8d61d35d5ad5

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    Tyler was also on the IH podcast, you might be able to get more info there (I haven't listened to it yet so can't say if it answers your questions).

    1. 1

      Thanks @rosiesherry
      I'll definitely listen.

  4. 1

    For most bootstrappers its a good option. The only reasons I can think of are

    • You have to register as a US company I believe so that is one problem.
    • If you like flexibility aka want to take 3 months off a year might be hard if you have investors with expectations
    1. 1

      Thanks for the input Volkan,

      The first is a big deal for me as my product focus on privacy. The privacy community doesn't like USA based companies.

      I guess the second one is doable, still, probably any kind of investor will take some freedom.

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