Quote: (11-16-2013 11:24 AM)AntiTrace Wrote:
A recent project I've been working on has passed my tests to the point where I am comfortable going forward with it. But I'm looking to go big so I'm looking secure around 500k-1mil which would give me the required capital for hiring employees and covering overhead for one year at which point I expect to be running a profit. I could get a loan for the 500k range but I would prefer having a mentor with a stake in the biz helping me.
Don't get a loan. Most startups fail very quickly, and then you're stuck with insurmountable debt. The whole point of angels is that they take on that risk themselves, because they can afford to do so. It's part of the game for them...fund 20 startups and hope that 1 will return a profit.
Quote: (11-16-2013 03:37 PM)AntiTrace Wrote:
Conservative estimates put the possible profit around 150mil annually (thats for 100% market share) with the ability to expand to other industries which would increase that. Competition is light and not well established. I have high confidence that it will become viral in the targeted market.
When will your business be profitable? Most startups vastly overestimate how quickly they will start making money. Very likely it will take 3+ years, so expect to show your financial projections through 2017.
100% market share is ridiculous. If you profit $150mil/year, competitors will move in very quickly, and that's a guarantee. How will you defend against competitors who will steal your idea and try to beat you at your own game?
Having high confidence that your business will "go viral" is not a business plan, it's a dream. Everyone thinks their company will go viral and angels aren't going to fund your dream.
Quote: (11-16-2013 03:37 PM)AntiTrace Wrote:
How should I go about even getting the meet? Should I go in person and drop off the biz plan with a secretary and just hope it makes it way up through the channels?
Dear god no. You're asking for a million dollars, not a job at McDonald's.
Here is what you do:
Find Angel groups in your city. Submit your idea. If it passes the screening test, they invite you to present to their membership (20-50 angels) along with a dozen or so other entrepreneurs. You’ll get 10-20 minutes to present your idea and answer questions. This is where most guys crash and burn HARD. They’re so caught up in their own world they aren’t prepared to answer a variety of difficult questions designed to challenge you. Remember: you're asking for these guys money, don't waste their time and they won't waste yours.
If anyone likes it, they take you on for due diligence, where they (at a later date) tear apart your business plan, vet your team, etc. Only then do discussions about funding, biz structure, etc. come into play.
Quote: (11-16-2013 03:37 PM)AntiTrace Wrote:
Where should I network to get access to these guys? I don't really roll in the circles of cats who can drop a million on an idea.
You don’t need to. There is an established process that you can follow. Having connections doesn’t hurt, though.
Quote: (11-16-2013 03:37 PM)AntiTrace Wrote:
What terms can I expect? I'm already willing to give up a share of the company in exchange for the funding, a well connected parner, and a mentor...but how much of a chunk do these guys typically go for?
You shouldn’t be so excited to give up shares before you get going, even though they will want a high %. That discussion comes much later, after they have decided to invest in your idea, so it’s not something to worry about now.
Quote: (11-16-2013 02:52 PM)AntiTrace Wrote:
These guys get approached all the time, its like a blonde 10 sitting in a bar in Jersey, how do I position myself above the noise?
Have a really fucking good idea, and an even better plan for how to execute.
Quote: (11-16-2013 02:52 PM)AntiTrace Wrote:
I have heard nothing but positive responses from customers in the alpha test and random people I have talked to here and there.
There is always high demand for an unavailable supply. Meaning, of course people will tell you they like your idea. But getting them to pay for it is an entirely different story.
Quote: (11-16-2013 02:52 PM)AntiTrace Wrote:
The basic version uses a prepacked software that limits my revenue (fees they require for using their software). My employees would be web developers and software engineers that would customize the entire backend software so I can eliminate the prepacked softwares fees.
This sounds like a disaster. No one is going to invest in prepackaged software. How long will engineers need to develop or redevelop this software? Probably at least a year. Have you factored that in to your business plan and financial projections? What happens if it takes longer?
Quote: (11-16-2013 02:52 PM)AntiTrace Wrote:
I have something like 2 or 3 grand worth of airline points saved up, maybe I'll take a trip to silicon valley and scope things out, see how much it would cost me to hire some quality young developers and get some office space set up.
Thinking you need to go to Silicon Valley to get funded or to run a startup is like thinking you need to be rich to pull hot girls.
Zuckerberg built facebook on a laptop in his dorm room in Massachusetts. Think about it.
Young developers are being aggressively recruited by Facebook/Apple/Google with starting salaries $100k+. How will you convince them to take a chance and work with you when Google is knocking at their door?
Quote: (11-16-2013 03:37 PM)AntiTrace Wrote:
In theory it will be up and running within a few weeks using prepackaged software for the backend. The fees the prepackaged software charges me damn near drains my profit margin to nothing. I'm using until proof of concept is proved.
The funds would be to redesign the entire back end (front end would stay identical, essentially no customers would even know anything at all had changed). That would run me about 100-150k from a web development firm,
In theory, I should be fucking a new girl every night of the week. But that isn't how life works.
This prepackaged thing sounds like a disaster. Why are you going this route?
Overall, not knowing what your idea is (it sounds a whole lot like paypal...), it seems like you need a reality check on the $$ side of things.
Multiply projected costs by 5
Multiply projected development time by 3
Divide projected profits by 10
And then you will have a more realistic view of how things are going to turn out. This is not an exaggeration.
Most startups fail because they run out of money, because they overestimated how quickly they would turn a profit, and underestimated their costs, the market size, competitors, and demand.
Also:
Angels want to know about your team. Why you? Who is your dev team? What have they built in the past? Don’t have a dev team? No one is going to fund your 6-month job search.
What is special or unique about your team that will lead you to success? How will you overcome your weaknesses?
Repeat: DON’T get a fucking loan. That’s suicide. If no one is willing to invest money into your idea, then it isn't a good idea.
And finally…the most important question a smart angel will ask you, the one that leaves most would-be entrepreneurs dead in the water is…
What problem are you trying to solve?
If you can’t convincingly answer that in 1 sentence, it’s game over.
It sounds like you need to do a lot more homework. But don’t give up, starting a company and earning millions isn’t supposed to be easy.