Advice for raising capital without a built product?

I’ve been working alone on a startup, and I’m at the point where I need to raise capital to have my product coded, and it’s not going to be cheap (it’s closest to a stock trading app)…

Any and all capital raising advice would be really appreciated. Even if it’s not directly related to not having a built product yet. 🙏

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Startups – Rapid Growth and Innovation is in Our Very Nature!

Slow customer growth post-Seed, what are the chances of raising another round?

TL;DR: Startup struggling to grow post-Seed, any advice for future funding rounds?

Hi everyone

I'm the founder of a B2B marketplace startup. I was a solopreneur during most of 2019 and bootstrapped the entire business. I launched the product in Q3 2019 and began acquiring business customers quite soon after launch.

We raised a pretty sizeable seed round from a VC right before Xmas 2019 and I spent the first 3 months hiring two experienced senior team members (Ops & Tech), and developing our branding & website.

At the end of January this year, we were seeing average growth, probably getting a new business customer every 2-3 weeks. We weren't too worried as we were still developing our product, funnel, sales strategy and so on.

Once COVID hit, like many of us, all sales and interest took a nosedive. Our pipeline turned to shit, and they claimed to no longer have budget for our product, despite it sitting in a relatively integral function of a business (HR/Culture).

Our strategy to cope with this so far:

  1. Circle back on our product. We recently retained a great UX/UI designer for a lot less than his market value (due to being furloughed) to properly design what I had bootstrapped and sold to clients. Prior to covid, the strategy was to sell what we had (a crappy looking but very functional platform) for as long as possible until our revenue reached a milestone that triggered a redesign.
  2. Focus on getting the most out of our current clients. Our platform is accessed by all employees of a business, so our focus was to boost engagement so we can potentially grow their account size. Moreover, we could use that to build case studies to attract new customers
  3. Slightly shift our marketing strategy. We ceased all direct sales advertising, and have now ceased cold-mailing and outbound campaigns. Instead, we are investing our budget on building brand recognition and awareness in our sector so that we are top of mind when things go back to normal.
  4. Market research. The nagging question mark is that of Product Market Fit. I fear that early signs of PMF we had before covid-19 are now out of the window as those businesses have been dealt a hammer blow. So our challenge now is to build a method in which we experiment and test different iterations and marketing messages to see which market segment gains the most traction.

My worry is: without growth, are we a lame duck?

Why I've decided to post. I'm anxious that we're not going to be attractive to any investor if we haven't shown aggressive growth, despite the recession.

My question to you:

What are the kinds of achievements to strive for, if growth is not possible, to investors in Q4 2020 in order to raise another round?

Currently we have a run rate of about 15 months which is OK but that's if we strap ourselves in and essentially only pay salaries.

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Startups – Rapid Growth and Innovation is in Our Very Nature!

Extra Crunch Live: Discuss work and raising cash in a downturn with Revolution’s Steve Case and Clara Sieg right now

This afternoon, we’re chatting with Steve Case and Clara Sieg of Revolution as part of our new interview series, Extra Crunch Live.

Topping our agenda, we will talk about jobs — in Silicon Valley, on the coasts and in the heartland. The technology sector is suffering through a contraction caused by the COVID-19 global health crisis, and layoffs are hitting nearly every company.

We hope you’ll join the conversation. During our hour-long chat, Extra Crunch members can submit questions directly in the Zoom Q&A.

Steve Case has a unique vantage point. He co-founded AOL and steered the company through the first dot-com bubble, where AOL emerged as a dominant force. Later, during the 2008 economic crisis, Case led investments with his then-new firm Revolution.

Likewise, Clara Sieg has managed Revolution’s Silicon Valley efforts for the last eight years and can directly speak to the current upheaval. While at Revolution, she helped the firm raise two significant funds, including its $ 450 million Growth fund and its first institutional fund of $ 200 million.

Together, Case and Sieg are well-qualified to offer advice on negotiating the current climate.

Since its inception, Revolution has strived to invest in startups in and out of Silicon Valley. With the COVID-19 crisis, this model is relevant more than ever. We’re curious to hear the pair’s take on companies experimenting with permanent work-from-home policies and what this means for real estate prices in hubs like San Francisco and New York. Do they think the pandemic will create a lasting effect on the technology sector’s workforce?

This chat is the latest in our ongoing series of discussions with notable investors, entrepreneurs and technologists. Previously, TechCrunch staff sat down (virtually, of course) with Cowboy Ventures’ Aileen Lee and Ted Wang, Sequoia’s Roelof Botha and Mark Cuban, to name a few.

Join us today at 3:00 p.m. EDT. It’s going to be a good time.

Details are below for Extra Crunch subscribers. If you need a pass, you can get an inexpensive trial here.

Details

Here’s the information you’ll need:

Startups – TechCrunch

When should you start raising money?

That is a loaded question, I know. Everyone’s circumstances will be different. However, in my personal case, my startup has been bootstrapping the past two years (mostly from grants). We’ve finally got a recurring revenue source (~$ 100k per year) and we have two options (correct me if i’m wrong). Either we continue to bootstrap and move slowly but deliberately, but have less access/ability to hire new talent because we have to stay lean. OR we go out and spend some equity and do a seed round of maybe 1m (very open to your thoughts on whether we are pre-seed still or seed and how to decide how much you want to raise).

Why would we need the fast track cash? Because we obviously want to beat our competitors to the punch and also we need access to fresh talent, like a potential founding team (it’s still just me and my co-founder right now). Our mentors/potential investors have suggested we do a round only when we really need to. My question is simply to ask for your opinion on what signs tell you that now is the time to raise.

On the flip side, we’ve always wanted to bootstrap for as long as possible because we want to control the speed and flow and what we decide to focus our time on. Would rather not have a VC or even an angel breathing down our neck about our decisions. However, everyone reaches their ceiling of competence. Perhaps there is a benefit to bringing in the big dogs and having them look at your company under a microscope?

Would love to hear your thoughts, personal anecdotes, suggestions, etc!

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Startups – Rapid Growth and Innovation is in Our Very Nature!

Raising Funds for an Unusual Business

NOTE: I will not start pitching till late this year when the virus has died down.

I am nearing the point where I am looking into investors for my startup. Our business is a haunted attraction company that will open a seasonal attraction in my city (Las Vegas). The city has a clear demand and as some other attractions in town have closed the market definitely has room for a new fresh idea.

My question: What is the best way to find investors who would be interested in such an unusual business. I know for Angel investors they usually want to be in their industry. Do you think I should look for general entertainment investors?

We are looking for $ 100,000 and while the business is not crazy profitable it can absolutely break even within a couple years and then make a good profit in years 3-5.

I just want to have a running start looking for the RIGHT people. Thanks!

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Startups – Rapid Growth and Innovation is in Our Very Nature!

Mark Cuban: ‘Raising money isn’t an accomplishment, it’s an obligation’

Mark Cuban isn’t impressed that you’ve raised money.

“If you think the accomplishment is raising money first, we’re probably not gonna get along,” said Cuban in an Extra Crunch Live interview. “If your orientation is ‘I got to raise the money first,’ you don’t really have a company yet, and you really haven’t accomplished anything yet. […] Sweat equity is the best equity.”

We also got his take on today’s economy, the nation’s direction and his notes on what startups should do to survive in the new world. Happily, as we had an hour to chat, we managed to cover a lot of ground. The full conversation (YouTube) is after the jump, and we’ve excerpted a number of quotes for your perusal.

But up top we wanted to share Cuban’s notes regarding which companies should accept Paycheck Protection Program (PPP) funds from the Small Business Administration. The matter became a hot-button issue in and around Silicon Valley, where initial debate centered around which startups could access the money. After it became clear the first installment of PPP funds wasn’t going to last, whether startups should access to the capital at all became a question. Some venture-backed companies even decided to return their PPP check.

According to Cuban, when PPP was first put together, the market’s “perspective was that there’d be plenty of money for everybody. You know, people didn’t really want to do the math.” Cuban said that if there was $ 350 billion in the pot and one million small businesses, the fund would have worked out to $ 350,000 apiece. “Well guess what,” he said, “there are 30 million companies, [and] like 20 of them are independent contractors.”

Once you did the calculations again with that many companies eligible for PPP funds, you could tell that the money wasn’t going to last. So Cuban told firms that he’s invested in where he has sway to “either not apply or just pay it back immediately.” Why? “For the betterment of the country and the economy,” he said, adding that “if you do have access to capital” or “your business isn’t dramatically impacted [then] let’s leave [the PPP money] for the people who need it the most.”

As noted, the full video is below (you can join Extra Crunch here!), along with Cuban’s notes on startup advice during the pandemic, American 2.0 (and Marc Andreessen’s essay), AI, pre-seed companies, his future in politics and how to pitch him.

Mark Cuban on the record

How he’s advising portfolio companies during the pandemic:

So first and foremost, communicate. Second is be honest. Third is be transparent. And fourth is be authentic. Because everybody is nervous. Everybody is terrified at a certain level. So you just have to recognize that. People are going to need that honesty from you and people are going to want communications from you. That’s been the primary thing around what these companies should do.

Regarding cutting costs: Every business is different. On the smallest ones, they’re already grinding, and it’s typically dependent on the founder. I’ve really tried to encourage people to keep all their employees on if at all possible. That there’s gonna be a lot of change and that’s going to create a lot of opportunity. So, if you can hold on to your employees and push forward in any way, shape, or form, you may have an opportunity.

Startups – TechCrunch

Money-saving app Chip smashes crowdfunding target raising €2.9 million

Today London-based Chip, the clever app that automatically saves up money for you, shares its growth opportunity with its investor community as 4,240 people invest around €2.9 million to fuel the firm’s progress. Working with Crowdcube, the private round exceeded its €1.1 million target within hours, making it the largest equity crowdfund to be completed in the UK since the lockdown started.

The funds will be used to further accelerate Chip’s growth, including the launch of an FSCS protected savings account through a partner bank with one of the highest savings rates on the market, as well as to deliver new features to accommodate the changing behaviours of their savers since the beginning of the pandemic. Chip’s user base has increased over 40% in the first three months of 2020, with the average amount put aside by savers each month increasing by 13%. The ‘safety net fund’ has knocked ‘holiday’ off the top spot as the most popular goal set by  savers since the outbreak started. Similarly, people are tapping into funds originally set aside for holidays, festivals and weddings and spending the money on supporting small businesses, purchasing homeschooling supplies and laptops for kids and DIY endeavours.

Chip, founded in 2016, is a clever app that automatically puts money aside for you, so you can save up for your goals without thinking about it. The free app, available on iOS and Android, uses AI to decide what to save, sends you a notification saying how much money you’re about to put aside (with an option to cancel), and then automatically transfers it into your Chip account. The team is currently headquartered in London and has grown its team to 200+ people.

Simon Rabin, CEO and founder of Chip, said: “We’ve seen unprecedented growth during these difficult times, which demonstrates that Chip is incredibly useful for putting money aside for safety net and emergency funds. Off the back of this growth, we wanted to share the opportunity with our investor community, and have been overwhelmed by their response.”

“Following on from the FCA authorisation, our next big milestone will be the launch of an FSCS protected savings account, giving our users an even more efficient tool to save up for their goals – whatever they might be.”

Chip has over 10,000 shareholders from previous funding rounds with Crowdcube and has over 250,000 downloads. In March they received full FCA authorisation which enables them to launch FSCS interest bearing accounts and roll out ChipX to their entire user base.

Luke Lang, co-founder of Crowdcube, commented: “The raise with Chip shows that, despite the bigger economic turmoil, there is still an appetite from communities and everyday investors to support startup and scaleup businesses. Investors see that Chip is a service that helps people manage their money and save and they want to give support to that movement. Chip’s growth is over and above the fintech app’s greater market growth which has seen average weekly app downloads jump 20% between the end of last year and the first three months of this year.”  

EU-Startups

Raising in a recession

Hi, hope you're all hanging in there.

How is the general market outlook now for raising VC capital?Are most funds holding back to see how the economy plays out? Or are funds still willing to invest (remotely?)?

Further, is there any place were you can look up summaries of recent valuations in Series A rounds? And would a bootstrapped start-up with approx. $ 40-50k in weekly revenues, 36% gross profit margin and break-even net profit be considered Series A or something else?

Edit: We're located in the Bay Area.

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Startups – Rapid Growth and Innovation is in Our Very Nature!

Raising money with Crowdfunding/Kickstarter

Hey everyone,

Has anyone here had any experience with Kickstarter/ Crowdfunding in general? If you've raised money or the funds you needed as a first investment round for your startup/business.

Looking to connect with you if you have, I would be super grateful if could share your experience and maybe answer a few questions 🙂

Thanks a lot in advance !!

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Startups – Rapid Growth and Innovation is in Our Very Nature!