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not really close and super suspicious. know if you actually need to raise money and why and if you do, know your numbers. also don't just look to raise money and hire whoever you can get your hands on to 'manage a business' know who you need and why, plan a top line growth strategy, and a more humble strategy with less capital
If you have revenue, then your next step should be to decide what can be done within the limits of that revenue. Nothing you described sounds like you need any capital investment. Funding is a shortcut, not a requirement.
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Well that helps clarify the question considerably. > No salaries, no office. My two cofounders and I have > been throwing everything we've got into this; we're > all broke To put it nicely, "So what?" (I know that sounds cruel but trust me it isn't) What you have is a bit of traction, you don't actually have a business yet and as such its probably too early for any but the most inexperienced of investors to invest in…
Haha don't worry about the harshness--comments like yours are why I posted here. The point I wanted to make with needing to hire people is that it becomes more cost-effective to have one "listings manager" maintaining 35 schools (we've budgeted for four "listings managers" total, once we're fully operational at the 150 campuses--the job mostly a lot of calling), and one sales person handling multiple schools, etc. Th…
Start here: "We've calculated revenue per campus as well as cost per school/cost per student/revenue per student and all that..."
There are some businesses where the economics get better with scale (search advertising for example) and some where scale doesn't have nearly the same level of impact (a lot of service businesses, grocery stores, etc) Yours would seem to be more of the latter.
As much as they dislike the characterization, many sales people are coin operated, specifically the profession attracts people who like an easy to use 'scoring' system for how good they are, and sales is great for that since the score is built into the job. Since you feel like a listings manager can handle 35 schools, and there is three of you, why don't two of you start in the role of 'listings manager' and the third hire a sales person and focus on getting student "reps" signed up. Plug into the student financial aid department, they love having part time work opportunities with flexible hours for students. The sales person is going to want to be "hands on" and talk to people directly. Ideally the person you hire here is going to eventually be your VP of sales and will train other sales people, so consider making a deal of equity for work early on.
Challenge yourself to take the people you have, add exactly one sales person, and make enough money to pay everyone salaries. If you can't do that, with 35 schools then you don't have a business yet. Don't be afraid to fire your sales person if they don't deliver. I isn't anything personal it's just a fit thing, either they can sell your product or they can't, either the product can be sold or it can't. If getting advertisers is "easy" then your sales guy will be very productive, make themselves and you a lot of money. Also don't be too surprised if you can't work a very large territory with a single sales person. Getting people to part with their money is an art and it takes skill just like writing code does, respect that.
Always keep in mind the 'big plans' and so when you make decisions make sure they don't cut off future plans (for example don't sign off advertising rights to a third party for the rest of the world or something) but get the core of the business running and tuned, then take it to the next level.
First, decide if you really need to raise money. Can you bootstrap (ie, self fund) your business? Too many people immediately go for capital when they don't need it. It's extremely distracting and not all that necessary. You should only look into raising capital if you have a capital constrained opportunity or problem. So many problems initially look like money problems, but they're really disguised as something else…
We've been bootstrapped since the beginning, but, as much as we don't want to admit it, we're starting to outgrow what we can do as our very limited personal savings start to decline. Yeah, it's cool to have some money in the bank after doing these advertising deals, but it's not nearly enough that it's sustainable right away. We have plans to expand to 150 schools across the country, and if we do that we project to…
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Do you really need to roll out to 150 campuses in one year? Use the profits from your first to roll out to a 2nd, then use the profits from 1+2 to roll out #3, etc. BTW, for each new city you roll out to you should be trying to figure out how to do it better. When you've proved you have a repeatable, scalable model, you can take on investors to accelerate the growth. This is more or less what FB did.
Our roll-out process involves having people getting and maintaining the property listings (a fundamental component of our business involves vetting properties to make sure they will take students, as about 60% will not), then building traffic at the school, and then securing advertising placements. We've successfully rolled out to three separate, unique campuses, and yeah, we've definitely learned a lot from each one…
1) You currently have approximately $500 to $2k in revenue. That's great, because it is $500 to $2k in revenue more than the vast majority of people will ever achieve. You need to work the numbers on whether the founding team can solo-close $100k in revenue in the next twelve months.
If that appears achievable, you tighten your belts, perhaps run up larger balances on your credit cards than usual, and start solo-closing every business you can find locally. You'll spend approximately 95% of your effort in the short term on ad sales and 5% on everything else. After you can consistently keep the lights on, you're going to hire a bunch of folks who will do that job to your script on the telephone all day, every day. They will be the heart of your business. They will always be the heart of your business, for values of "always" which map to "as long as you primarily keep the lights on by convincing local businesses to buy advertising."
There is a reasonably achievable path to you having a business here which closely resembles a well-run local newspaper (except you'll potentially have nationwide reach): millions of revenue, ~20% margins, etc. Much like local newspapers, it may be a not-quite-straightforward proposition to confidently say "The people who pay us get great value for their advertising spend."
If your team cannot reasonably solo-close $100k in revenue by repeating your current model, which I allocate a very non-trivial percentage of the probability space to, you do not actually have a revenue model yet. I'd have a hard look at my bank account and say "Can we figure out a revenue model before I get thrown out of my apartment for non-payment of rent?" If not, you may consider winding down the business. There is no shame in this and, while you may think your current level of success is a once-in-a-lifetime opportunity, if you hypothetically believe that I would take the other side of that bet.
2) You have a very compelling pitch for getting into YC, 500 Startups, or another incubator. You have actually shipped a software product. You won't believe me when I tell you, but many, many people who you might think are better fits for incubators cannot actually ship a software product. You have also successfully demonstrated hustle, by being able to walk into a furniture store and ask them for money, which is something which is lamentably rare among people who are capable of actually shipping software products. The combination of shipping and hustle is pretty much exactly what incubators look for.
This is a straightforward pathway into Door #3, in case executing on Door #3 doesn't sound straightforward to you.
3) You have all the elements necessary for raising a small seed round. You make an AngelList profile and curate it diligently. You approach a few investors privately, show them your stats and paint a rosy picture of the future ("We've potentially got Groupon's growth trajectory ahead of us! [+]"), and secure, say, three to four commitments of $25k each. You start to trend on AngelList and fill out the rest of the round, probably for $250 to $500k. (I'm unaware of what the Going Rate is for valuations at the moment -- probably mid single digit millions but ask someone who does this professionally to fill you in there.) You bump yourself up to greater-than-subsistence salaries, hire three or four people who are young and hungry, and aim to sustain those growth rates for the next 8 to 12 months. If you do, you will sail easily to Series A, on your way to creating an rather large business which may or may not resemble the one you are presently running. If you don't, your company implodes.
[+] "Patrick, is that a good thing?" None of the seed stage investors in Groupon are cursing their name right now. To put it mildly.
1.4 1.4 1.4*1.4 != 2 not really close and super suspicious. know if you actually need to raise money and why and if you do, know your numbers. also don't just look to raise money and hire whoever you can get your hands on to 'manage a business' know who you need and why, plan a top line growth strategy, and a more humble strategy with less capital
1.4^5 ~= 5.4
Make sure you're being truthful about your figures with yourself - like don't assume you're making a profit just because you're taking revenue, especially not if you're not paying wages yet.
Earlier quoted context omitted.
We've been bootstrapped since the beginning, but, as much as we don't want to admit it, we're starting to outgrow what we can do as our very limited personal savings start to decline. Yeah, it's cool to have some money in the bank after doing these advertising deals, but it's not nearly enough that it's sustainable right away. We have plans to expand to 150 schools across the country, and if we do that we project to…
"as our very limited personal savings start to decline. Yeah, it's cool to have some money in the bank after doing these advertising deals, but it's not nearly enough that it's sustainable right away." Bootstrapped = your profits are able to grow as your company grows. It sounds like you have an expensive hobby at the moment. Either scale back your operations so you're profitable or grow your numbers.
First, congrats. Having real revenue probably puts you in the top 5% of startups already. Great work. - Incorporate. You want the legal protection of (at least) an LLC. - Really think about if you need to raise money. If you do, it should be easy to raise $100k-$200k with real revenue and traction. But it sounds like you're in a position where you could actually bootstrap this. Equity is expensive. Think twice before…