Big News: FounderDating is joining OneVest to build the largest community for entrepreneurs. Details here
Latest Notifications
You have no recent recommendations.
Name
Title
 
MiniBio
FOLLOW
Title
 Followers
FOLLOW TOPIC

Question goes here

1,300 Followers

  • Name
    Entrepreneur
  • Name
    Entrepreneur
  • Name
    Entrepreneur
  • Name
    Entrepreneur
  • Name
    Entrepreneur
  • Name
    Entrepreneur
  • Name
    Entrepreneur
  • Name
    Entrepreneur

How much should I raise in a seed round?

I put in 500k of my own money in developing the platform with a strong believe in the idea.
I am now at fundraising stage and need some help. The way I see it I have 3 options:

1. Raise 750k to 1mm from Angels - Pros - Easier process, Fast, Least amount of equity given away. Cons - Shoe string budget resulting in slower technical progress, slower to market, chance to fail if we don't get enough traction with provided capital.
2. Raise 1.5mm to 2.5mm from Angels and VC - Pros - Achieve break-even, prove traction and build-up valuation prior to next round. Cons - Not as aggressive as we acquiring market place, not being able to hire A+ team.
3. Raise 3-5mm from VCs - Pros - Faster market acquisition, stronger technology platform, A+ team. Cons - More difficult and longer process, give out more equity.

I am new to fundraising so any good advise is appreciated.

22 Replies

Diego Oppenheimer
2
1
Founder , CEO at Algorithmia, @doppenhe
I think you need to approach it from a different angle and you need to understand the investment from the other side.

For angel investors usually 1-10 investments will succeed so is there enough in your business that they can get 10x return for what they put int. The answer here is usually yes because the amounts are smaller 10-50k. Also as you mentioned the least equity given a way and a speed of getting the money raised.

To be invested in by a VC you have to be VC fundable - not all businesses are. In fact most are not.
VCs are in the hunt for unicorns and you need to understand the fund size. They bet on companies that can pay their entire fund out (because of the high failure rate). So lets say the have a small 30 million fund and you ask them for 1 million for 10% of the company. This means they are looking to see if you could ever be valued at 300 million.
This might well be within what you think your potential market size is and in that case VC funding is the way to go.

Despite what the press might have you thinking getting VC funding is really hard. Raising a first round of capital in the 3-5 million without impressive revenue projections, and/or an enormous market that you have a chance at dominating will not be an easy task.

Hope this helps.
Kate Hiscox
0
0
Kate Hiscox Entrepreneur • Advisor
Boss at Venzee
Hi Arthur, Do you have any traction as yet? Users, MRR and so forth after the $500k? ?
Sanjeev Rao
0
0
Sanjeev Rao Advisor
Chief Product Officer
Arthur, what did the $500K you've spent so far buy you? Were you able to unequivocally show a) that your users want the product and that users have demonstrated in actions that they buy into your long term vision and b) that you have demonstrated that you can make money. While most argue that $500K is enough to prove that out, there are some areas that do need more capital. You've not indicated what that is.

I lean towards the amount of the money you think you'll need to comfortably get to the next key milestone with plenty of room of mistakes and misteps along the way.
Arthur Veytsman
0
0
Arthur Veytsman Entrepreneur • Advisor
Founder at Immerss, 6x Entrepreneur & Angel Investor. Building relationships with Angel Investors worldwide.
@Diego. Agree on all fronts. I do believe our potential is big enough to attract VC funds but I am deeply afraid of being sucked into a long and painful process. I also realize the fact that I am not in Silicon Valley and it is much harder to get the exposure being in Dallas, TX. I need a strong adviser with right connections to VCs. Or proceed with Angel strategy with full understanding that I need to get ready for VCs.
Arthur Veytsman
0
0
Arthur Veytsman Entrepreneur • Advisor
Founder at Immerss, 6x Entrepreneur & Angel Investor. Building relationships with Angel Investors worldwide.
@Kate and @Sanjeev - 500k was spent on building the platform. The idea was validated in early stage by MVP with several users and surveyed to many others. I know its a tons of money but it is a very complex video platform and we did not want to come to market with half-baked product. We are in Beta and just started taking the platform live so no traction to speak of yet.
Kate Hiscox
0
0
Kate Hiscox Entrepreneur • Advisor
Boss at Venzee
@Arthur - I understand. If you had to spend that much on dev then it would suggest you've got something pretty specialized. So I would suggest you focus on funds and angels that get your space and the complexity of what you have built. In terms of how funding, without traction you are pre-revenue and that is hard to defend without something very compelling, be it team, technology etc.

Outside of the Bay area, that becomes a harder sale. So I would go with a smaller raise to get you to milestone that reflects traction and revenue. Based on my experience, MRR of $100k is needed to go after a Series A without the above (proven team with existing investor connections etc.).

If I can help further, feel free to reach out.
David Woodbury
0
0
David Woodbury Entrepreneur
CEO @CampNative
How much revenue do you currently have?
Steven Vargas
1
0
Steven Vargas Entrepreneur
Product Manager at Hipmunk
@arthur Raising a series A type round (2M and up) will be extremely difficult without either great metrics, an A+ team of people who have killed it before, or a technology that will dominate a tech industry.

To be honest, raising an angel round of $500k isn't a fast/easy process either without some good metrics or someone behind you who believes in the vision. Likely a few month process if you can get in front of the right people. As you said you are looking for someone with connections this may take longer.

I think, as @sanjeev said, figure out your next key milestones (user adoption, retention, revenue), and raise enough to hit those targets. Likely you want enough to be findable at series A. So how long will it take to show real traction, etc. How much money do you need to get there. Add 33% because you'll underestimate. Sell the vision.

Also, I'm not exactly sure what your company is/does, but you should spend on the biggest risks first. So if your biggest risk is getting the tech right (think a company like Occulus), then spending the $500k is reasonable. If the biggest risk is that you haven't proven the need or that you can capture a large market (mist likely in a marketplace), you should be spending on proving that given a solution you can bring in tons of users. And if it's business model focus on showing users will pay and your costs (cac, unit costs) can generate huge profits.

Good luck and hope that helps.

Steve


Arthur Veytsman
0
0
Arthur Veytsman Entrepreneur • Advisor
Founder at Immerss, 6x Entrepreneur & Angel Investor. Building relationships with Angel Investors worldwide.
@David. We are pre-revenue.
Mary Kopczynski
0
0
Mary Kopczynski Advisor
J.D./Ph.D. Law and Global Affairs | CEO & Founder of Eight of Nine Consulting, LLC
If you got a $750k check today do you know exactly how you would spend it in what order and how fast it would go? What about a million? Investors prefer larger investments with a liquidation event in 3-5 years. If you are still piloting, a small angel is better. They can bring in the bigger investors once you've proven your concept has traction. Mary Kopczynski, J.D./Ph.D. CEO, Eight of Nine Consulting, LLC 1115 Broadway, 12th Floor New York, NY 10010 [removed to protect privacy] [removed to protect privacy] www.8of9consulting.com **Sent from my iPhone**
Join FounderDating to participate in the discussion
Nothing gets posted to LinkedIn and your information will not be shared.

Just a few more details please.

DO: Start a discussion, share a resource, or ask a question related to entrepreneurship.
DON'T: Post about prohibited topics such as recruiting, cofounder wanted, check out my product
or feedback on the FD site (you can send this to us directly info@founderdating.com).
See the Community Code of Conduct for more details.

Title

Give your question or discussion topic a great title, make it catchy and succinct.

Details

Make sure what you're about to say is specific and relevant - you'll get better responses.

Topics

Tag your discussion so you get more relevant responses.

Question goes here

1,300 Followers

  • Name
    Details
  • Name
    Details
  • Name
    Details
  • Name
    Details
  • Name
    Details
  • Name
    Details
  • Name
    Details
  • Name
    Details
Know someone who should answer this question? Enter their email below
Stay current and follow these discussion topics?