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 do I set fundraising goals?

I met with an angel who thought my pro-forma expenses of $850k were too much (founder, 3 hires with 1 year runway). He told me I should get that below $250k. I can plan against any budget, and size employment, and costs as necessary, but if I'm trying to raise my money in the next month, how can I get angels to bite on a convertible note seed round?

Note: looking at cbinsights.com, it seems that Austin, Texas isn't the friendliest in terms of seed financing ($850k in SF for an ecommerce platform is not unreasonable) and also ATX doesn't do a ton of ecommerce deals.

12 Replies

Matt Mireles
3
0
Matt Mireles Entrepreneur • Advisor

If you are raising money outside of Silicon Valley, you are leaving money on the table. Period.

See:https://angel.co/valuations

That said, $850k for 1 year's runway for 4 people does smell fishy. Is the money just going to salaries, or do you have to budget inventory procurement as well?

Raising money is about convincing people you have something that's going to produce a return. There is no formula. You're selling yourself as much as you are the business, as the business can and likely will change, whereas the founder... not so much.

Do you have a product or anything launched? Anything in beta? It seems to me that you should be able to launch an ecommerce site without outside investment using something like Shopify, Magento or even Wordpress. I even launched v1.0 of SWIG using a static html Bootstrap page, a Wufoo form, Square and a viking suit.

See:http://mattmireles.com/blog/the-minimum-viable-startup/

Devin Fee
1
0
Devin Fee Entrepreneur
Director of Operations at Chiron Health
Thanks for the response Matt. That $850k budget included two engineers, a community manager in both Austin and Dallas, a sizable CPC budget, and a bit more. I have built an alpha, gotten feedback, and hope to get the closed beta out in the next week or so (I'm a software dev and operations guy myself).

As for the CPC budget, I was running operations for a failed ecommerce firm that our team turned around. We would put about $30k/mo into CPC and it definitely worked; so I was trying to spend at about a tenth of that.

I do have fairly high expenses, and need cash up front to scale. Again, though, I have reworked the numbers for $250k, but that is just me and one other person for a year, but I'd really prefer to have at least one additional person who can be completely dedicated to engineering.
Matt Mireles
2
0
Matt Mireles Entrepreneur • Advisor
What salary are you and the other folks drawing? More than $100k/yr?

Also, are you building an eCommerce site from the ground up? That seems like a bit of a waste at this stage unless you are doing something unusual.

$30k/mo on CPC seems crazy unless you have proven that CAC > LTV. Do you know that $1 in marketing spends returns > $1 in profit? What have you proven so far about the business?


Devin Fee
1
0
Devin Fee Entrepreneur
Director of Operations at Chiron Health
The $30k/mo was for the last ecommerce project. It was definitely sustainable (CAC > LTV).

Drawing a salary of $80k. Perhaps I'm deluded by trying to start with such a big number, but the feedback I get from the webs makes it seem that the average raise is really high at this point. I've deferred on speaking to more angels until I get my numbers straight.

Perhaps as an engineer myself I see an upfront opportunity to build a solution versus finagle an ecommerce platform to sorta do what I want it to do. Honestly, using a prepackaged solution is sound advice at this point though!
Matt Mireles
3
0
Matt Mireles Entrepreneur • Advisor
$80k is reasonable if are raising $850k, although a bit on the high side for Austin IMO.

Two things:

1) $30k/mo CPC might have worked at a different company, but that does not at all mean that it will work with your product. You cannot assume that unless you have data that proves you can acquire customers for this product for significantly less than their lifetime value.

2) Take your engineer hat off. You are no longer an engineer. You are an entrepreneur, a scrappy experimental economics researcher. Do not buildthingsfrom scratch. Instead, exert the least amount of effort to prove your core hyptheses around customer value and growth.
Richard Rosen
1
0
Richard Rosen Entrepreneur
Founder of FastCall --​> #1 Phone Sales Productivity app in the Salesforce AppExchange
I am not sure it even makes sense to look at a 1 yr runway. If you raise this seed round when do you expect toraiseagain? How much do you need to get to the next milestone? $250k could get you six months? Show traction, then raise $550. = $800k in one year. Add to head count later in the yr.

Is the $80k for your own salary, or your first hire? What I read into your question is that the angel does not think you should pay yourself. To me, that's the question you need to ask yourself. Do you want to take $ from someone who thinks you should take no pay. Its fine if its your decision... But if you need to pay yourself, and the angel disagrees. Walk away. Anysophisticatedinvestor knows your well being is paramount. The company is you.
Devin Fee
0
0
Devin Fee Entrepreneur
Director of Operations at Chiron Health
Richard, great advice. The angel does think I should get paid, but I do like the six month runway, re-raise idea. $80k is significantly less than what I've walked away from, and significantly lower than what I'd expect with my experience level here in Austin.

I'm going to take your advice and move forward with a 6mo pro-forma! So then the reasonable next question is that if I'm chasing a 6mo runway on a convertible note, how do I structure a conversation so that this is clear? Are there any good guidelines for what I should walk into meetings with? I am not well versed on what the angel needs to commit. I typically show up with a pitch deck, the output of my 5 months of research, and my product.

I'd like to show the investor a package, and say: "this is the structure under which I'm raising". I don't know how to define that structure.
Richard Rosen
2
0
Richard Rosen Entrepreneur
Founder of FastCall --​> #1 Phone Sales Productivity app in the Salesforce AppExchange
I raised my first $ from 500 Start-ups and used their note toraiseaddtl. 500 invested again, we we did the same a 2nd time. If your angel is experienced, and will be a good advisor - he/she know the drill. Most importantly - the idea angel leads.. brings friends.. You dont want just her money, but her network. In my experience, at this stage, too many questions on pro-formas are a bad sign. Any investor w exp knows the numbers are made up. That said.. the investor may just be testing how smart you are, howprepared.. but sheshouldknow the numbers are made up. Beware.. this is a huge time suck.. and not everyone writes checks. But most will be happy to waste your time acting as if they will. Be direct. Ask what checks have they written, to whom, and under what terms.
Devin Fee
0
0
Devin Fee Entrepreneur
Director of Operations at Chiron Health
From a sales perspective I have a difficult time qualifying investors. I think those questions - what checks have you written, to whom, and under what terms - are important asks.

I've been told that every meeting is a meeting to get another meeting. But, I want an investor to also sign on the dotted line. I've been a part of a two month run around, and it didn't result in anything but good company.

Thanks for the additional input Richard.
Rebecca Goberstein
1
0
Rebecca Goberstein Entrepreneur
I've always been advised that a seed round should get you 12-18 months runway for a consumer tech product, which generally gives you enough time to get traction and reach your first key milestione(s) whatever they may be.

In the SF/SV area, where I'm located, a very reliable seed-stage VC firm has shared they expect salaries to be around $10K/month, which is actually a bit higher than what fellow entrepreneurs I know pay themselves (most of those I know pay themselves $100-110K). I'm not sure how this translates to Austin.

Something Pouyan Salehi once told me (a fellow FD member) has stuck with me: the single most important decision you'll make, as an entrepreneur, is who to take money from - the second most important decision is who you'll partner with as a cofounder.

More wisdom I've heard from other entrepreneurs and investors: Whomever you take money from should help make it easier for you to raise money in the future, so make sure they're well respected, experienced, and have connections to deeper pockets.

Good luck!
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?