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At what point should I start thinking about raising a seed round?

I currently bootstrap my startup. I probably have enough cash to last 6 months, and our MVP is scheduled to go out in 2 months. One issue we have is that we are in the foreign language space, which means we need to roll out one language at a time. For that reason, we do not expect to get huge traction right away, but instead are focusing on increasing retention among acquired users.

I want to focus on product development and traction at this stage, but I also understand that fundraising could take 3-6 months. Does this mean I need to at least start working on reaching out to investors now, as I am a first time founder with limited investor connection? What other some other potential options? Off the top of my mind I have: crowdfunding, applying to an accelerator.

PS: my team right now is based in South East Asia, but I will incorporate in the US.

14 Replies

Michael Leeds
0
2
Michael Leeds Entrepreneur • Advisor
CEO & Founder
I have some thoughts better expressed on a call - if you're interested, ping me on LIn. via mobile
Anh Nguyen
1
0
Anh Nguyen Entrepreneur
Product Manager
Hi Michael, I just added you on LinkedIn. Thanks.
Andre Fox Wilson Sr.
1
0
Andre Fox Wilson Sr. Entrepreneur
Managing Partner | Business Funding
Based on the brief synopsis you have given, it appears you do not have a product to launch yet. What will it take to complete your product and begin selling it? This is important because now you move from concept to proof of concept, meaning there truly is a market for what you are promoting. No better validation than someone writing you a check. This also moves you from hypothesis to reality. Now you know your pricing is good and acceptable in the marketplace. With these things completed you can figure out how to continue to bootstrap or if you need additional capital and you will have numbers to prove why you need the money, what it will do for you and how you will pay it back. Crowdfunding is great, however; it is still based on your network of influence. So if you don't know many people with money and they don't know many people with investable means, it will fail. Be sure to consider this before you spend money to set up a campaign. Short answer, sell something first then figure out how to get capital!
Nick Saunders
1
0
Nick Saunders Advisor
CEO and Founder at Getlokal
Having at least an MVP before you start fund raising is always preferable in my opinion. You say you are in the foreign language space which is already fairly crowded so you will need to be able to show that you are different and superior to existing services. Having actual customers and being able to show some growth, even if it is based on a small time period, will definitely help. If you can show this in more than one language it should greatly increase your chances to raise funds. So I would delay serious fund raising activities until you have a working product, work hard to get there as soon as possible and then start your chosen approach. Meanwhile keep open to funding opportunities that may arise around you and take the time to look at and decide which is the best step for you, (continue bootstrapping, angels, seed round, accelerators, loans, Govt. programmes etc.), so you have a plan when the timing is right.
Ken Anderson
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0
Ken Anderson Advisor
Director, Entrepreneurial and Small Business Development, Delaware Economic Development Office
Ahn I like and support your approach. Dealing with a traction acquisition protocol in multiple languages creates unique challenges and you are correct, customer acquisition and market segmentation strategies take on new dimensions. If you are already bootstrapping, you may need to at least look at some debt financing options. You are probably still not ready to outreach to other types of investors at this point.
Adam Bell
1
0
Adam Bell Entrepreneur
Connecting China, ASEAN and the world
Now. Bootstrapping is good to a point but what would you need to go through MVP to first commercial milestone?
Colin Behr
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0
Colin Behr Advisor
VP, Business Development at Vungle
Agreed with other people on this thread that you do need to have some sort of a product to show before you start raising - at least based on what you've said. Unless the team has an incredible track record and would be implicitly trusted by a group of clued-in investors, you're going to need to show some level of validation.

Having 6 months of cash is fine, if you're still in validation mode (since you won't know yet if there's something there or not). However, if you plan to start raising in two months, that only gives you 4 months of runway and gives you zero leverage when actually raising since investors will know that you are under time pressure. I would recommend looking at doing some sort of a pre-seed - a small round that gives you some more runway so that you're at least not running out of cash while trying to raise.
Sam McAfee
1
0
Sam McAfee Advisor
Building Popup Incubators for Corporate Innovation Programs
Great answers here. You won't get a seed round without some traction, where traction typically means monthly subscribers on a growing curve. And that's hard to pull off without money--welcome to startups. :)

Traction is very hard. Start yesterday! That should probably be your focus, even above the MVP, and don't wait until you launch the MVP start signing people up.

I assume you're signing up potential leads on some kind of landing page ahead of time. Once you have it up and running, you're going to burn that list fast, and only convert a few people. You'll need a solid strategy to continue marketing the product. In addition to a language, you should probably focus on a specific customer profile (age, phase in life, income, job, whatever) so that you can really nail those people's pain. Why are they learning Spanish (or whatever)? How can your product help?

What channels do these people hang out in? Blogs? Clubs? Conferences? Magazines? The book "Traction" (and the site?) have the list of all the major categories. Go through it and narrow down three or four where your customer profile hangs out. And go get them.

I'd be happy to talk more about it (we already connected). I have a strategy here on Twelve Week MVP. It's a general approach to what comes first, next, etc.
Trisha Lotzer, JD
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1
Business and Health Care Practice Legal Services, Start-ups, Transitions, Purchases and Sales
The Lotzer Law Group is currently closed and will re-open in the fall as the Lotzer Mediation Group. If you would like a referral to another great attorney or law firm, you may call our office at [removed to protect privacy]. Your call or email will be returned at our earliest convenience. Thank you in advance for your cooperation and patience during this transition. Sincerely, Trisha Lotzer, JD Lotzer Law Group, PC
David Austin
1
0
David Austin Entrepreneur
Entrepreneur
I tend to agree somewhat with Adam. It doesn't hurt to start now, and proper mvp validation can often require investment. This would likely be an angel though, not a seasoned vc, though depending on your value proposition a seasoned vc, maybe a seed fund or even an accelerator, just to get on the radar if nothing else. I see a lot of startups run out of steam quickly right after doing the mvp, don't have the funds for proper AB testing, marketing and such, and thought "if you build it they will come" - not true and can be discouraging. So they don't get the validation they need to take it to the next level and give up. You only get one chance to make a first impression ... That means you need to both have the resources for the right impression and yet not get ahead of yourself. It's a careful balance, so the answer to your question is say is: lay the groundwork now for courting investors, whatever that takes. That also means now may also be the time to start establishing a network in the states.
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