Providing value.
I'll be honest. I never understand why people get so excited when a company announces it's looking for funding. To me, if you are looking for funding after a product has launched, it just seems backwards. After all, if your product was good, it wouldn't need funding after it launched.
I guess the idea with this is you need to spend a lot to bring it to a point where it's profitable. Google is an example where profit really couldn't exist until it grew large enough, and it couldn't really grow large enough without money, etc. Facebook is the same way. Twitter, too (Okay, does Twitter actually make money? Is it in the black?). But all these things focus on making money via advertising.
Anyways, enough of my useless questions. It was a good read.
I wonder what day they stop being YTD profitable...
Simplified example:
You have a customer acquisition cost of $10, and lifetime customer value is roughly $50. Average customer duration is 18 months. You expect this situation to last for 5 years. Your addressable target market has a population of approximately 20m individuals.
Ignoring all other factors, would you rather have:
a) 100% equity, and a $100k marketing budget?
b) 50% equity, and a $1m marketing budget?
c) 20% equity, and a $5m marketing budget?
I think I worded myself poorly. It's not initial funding I find odd. It's additional funding. You go out, get funding. Yay! Funding! Pays for starting the company and making it profitable. I just naturally ASSuMEd that your initial funding would cover startup costs, including marketing.
At least, that's the way my partners and I did it. Came up with an idea, setup initial work, got funding, launched on that funding. Maybe I'm just looking at it the wrong way (which I am sure is the reason).
You're kidding, right? I gave an example in which you've launched, have a profitable product, have $100k in the bank, and are debating the merits additional funding.
In my example, the additional funding will put a LOT of extra money in your pockets, even though you'll dilute your equity, and even though you'd have a profitable business without it.
Sometimes I think I'm living in two worlds, the customer world, where everyone is scrambling to get stuff done, and the startup world, where everyone is talking about what the customer world should be like.
Don't misunderstand me, though. I love the startup world. There is an underlying current of optimism that I rarely see in the customer world, where people are just too busy to see the possibilities if they hit them in the nose. Sometimes I have to grab my customers and yell, "Let's slow down for 5 minutes and think about a better way to do this!"
In the startup world, it's often too easy to lose sight of the definition of success. Success is not starting a business, getting into an incubator, or securing funding. Success is satisfying paying customers over and over again.
In the past 6 months, I've had 5 different customers ask me for the same thing. I described my approach to satisfying them to a startup investor acquaintance. He told me that no one would ever pay for it. Now I know I'm on to something.
I like living in 2 worlds. It helps me maintain perspective. Sounds like it works that way for you too.