I am raising 50k for my startup Blastchat on iOS! However, "people" are telling me I should ask for more money because serious angel investors will not invest because I am only asking for 50k! What's up with that?
Ask HN: 50k round not taken seriously by angels?
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Re: Ask HN: 50k round not taken seriously by angels?
#2You can't even hire one person with 50k.
Re: Ask HN: 50k round not taken seriously by angels?
#3The amount has little to do with whether an angel investor will be interested in you. They will want to know whether you can a) make your relatively small company into an actual money making organization and b) whether they'll have enough skin in the game to be profitable. If you are asking for $50,000, but are giving away 50+% of your equity, they won't be interested because you aren't a serious entrepreneur. If you are asking for $50,000 and really need $500,000 to get a demo or a mvp out the door, they won't invest because you'll never get out of the gate. Your business plan and equity agreement mean way more than the amount. Heck, if it turns out you are the right fit and need more down the road, they will be one of the first groups to reinvest.
Re: Ask HN: 50k round not taken seriously by angels?
#4You can't even hire one person with 50k.
This makes the very poor assumption that the only reason you raise a round from an angel is to hire people. A small business can, and should, be able to do quite a bit with $50,000.
Re: Ask HN: 50k round not taken seriously by angels?
#5You can't even hire one person with 50k.
Actually, my team & I can live off of 12 months and work on Blastchat 24/7!
Re: Ask HN: 50k round not taken seriously by angels?
#6The amount has little to do with whether an angel investor will be interested in you. They will want to know whether you can a) make your relatively small company into an actual money making organization and b) whether they'll have enough skin in the game to be profitable. If you are asking for $50,000, but are giving away 50+% of your equity, they won't be interested because you aren't a serious entrepreneur. If you…
Yeah, we are raising 50k at 1m valuation . . . . . I'm guessing they are saying this because the valuation is too high? Maybe investors want more equity . . . . Or they assume that we will need more than 50k to grow which will increase our valuation?
Re: Ask HN: 50k round not taken seriously by angels?
#7The amount has little to do with whether an angel investor will be interested in you. They will want to know whether you can a) make your relatively small company into an actual money making organization and b) whether they'll have enough skin in the game to be profitable. If you are asking for $50,000, but are giving away 50+% of your equity, they won't be interested because you aren't a serious entrepreneur. If you…
Yeah, we are raising 50k at 1m valuation . . . . . I'm guessing they are saying this because the valuation is too high? Maybe investors want more equity . . . . Or they assume that we will need more than 50k to grow which will increase our valuation?
How did you come up with a $1MM valuation? Do you have users? If so, how many? What is your path to profitability? That's a 5% stake which might be ok. It really depends on a number of factors. My guess is that in the iOS app market for a chat app in 2015. I think that might be high. But you might also surprise me.
Re: Ask HN: 50k round not taken seriously by angels?
#8Earlier quoted context omitted.
Yeah, we are raising 50k at 1m valuation . . . . . I'm guessing they are saying this because the valuation is too high? Maybe investors want more equity . . . . Or they assume that we will need more than 50k to grow which will increase our valuation?
How did you come up with a $1MM valuation? Do you have users? If so, how many? What is your path to profitability? That's a 5% stake which might be ok. It really depends on a number of factors. My guess is that in the iOS app market for a chat app in 2015. I think that might be high. But you might also surprise me.
Well we have been unofficially launched for two months and just passed 1,000 MAU'S. We have a couple of high profile users (NBA ALL STAR) and we are going to launched again on Product Hunt next week by a well known influencer . . . . The market is growing and we are solving a problem that many others have abandoned. It's just about growing this thing. We need 50k for the next year to focus on growth and increasing the valuation.
Re: Ask HN: 50k round not taken seriously by angels?
#9Re: Ask HN: 50k round not taken seriously by angels?
#10"People" are right, if you're talking about angel investors who are professional and subscribe to, say, Valley-or-equivalent norms.
Why?
1) Your investors will model $50k as being gone in an eyeblink. In the Valley, that's ~3 engineer-months. Angels will want your round to last about 12~18 months.
2) All entrepreneurs raising their first round are inexperienced in some way, but for better or worse, the combination of not knowing angel investors want rounds to be bigger and not knowing $50k will be gone in an eyeblink shouts Particularly Inexperienced Entrepreneur Here, which counsels against angels believing that your company will be the one out of 10 which > 10Xes their money. Angels absolutely, positively must invest in that company, and it's hard, so they reserve all their shots for companies they think might be that one.
3) You're horrifically mispricing your company relative to market conditions right now [+], which you would think would suggest a savvy investor would think "Hmm deal of the century", but which actually mostly signals "Stay way the heck away" because of the power law of startup returns ("If you make a practice out of getting great deals on good startups, you will lose money; you need to make get good deals on great startups.")
There are more fish in the sea that investors, by the way. If you really and truly need only $50k to make this business a success, one might suggest friends-and-family and/or bootstrapping and/or -- and one hesitates to suggest this but one may have used it before -- credit cards.
[+] If your company is investable, it is worth > $2 million right now. I'm taking the liberty of assuming you aren't valuing the company at that because no one does a round for Your company may or may not actually be investable. If you're curious, you can read on Venture Hacks. Fair warning: what the Valley institutionally considers as investable is, if one takes it as a judgement of one's worth, pretty brutal for most people building tech companies. (It's not -- I've had basically no investable company in my career until maybe the current one -- but many people wrap their self-worth up in what investors would say about their businesses for some reason or another.)