Investment increases your risk

Re:Investment increases your risk by soneca on Friday December 27, 2013 @08:33AM (#6970524)

I completely disagree about "Nothing focuses the mind on finding revenues like being broke and needing to make the rent." I know that a lot of people out there believe in this "desperation leads to solution" mantra. But I don't. I work much better and I am much more focused when I don't have to worry about bills.

I started to sell my product from month 1, but wasn't able to generate revenue from month 1. I have a SaaS for restaurants, the sales cycle is longer than a month, no restaurant (around here) close deals at the end of the year - this I learned from experience, but also from successfull and experienced entrepreneurs from the same market; also advised by these successful founders I am offering a 3-month free trial for the first clients. The advice actually was "you will only charge after the 10th client, you need social proof first of all, so give your product for free and then charge after the 10th early-adopter."

So, there is no way I can be profitable before March or April. Ok, maybe I am no sales wizard, maybe I am not good enough on this founder thing. But the point for me is, I am broke, and I already started my company, and I can't make it profitable. As I can't choose option 3 "go back in time and found another business" and I am not ready to quit this business, I will take funding.

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Re:Investment increases your risk by tptacek on Friday December 27, 2013 @09:38AM (#6970721)

Another way to look at this situation is that in the absence of revenue, you may be kidding yourself about the viability of the business. If you can't generate any cash from it, how do you know it's a product/market fit, or that you're capable of executing on it?

You will eventually come to learn that your time is precious, and that wasting it on an idea that can't be made to work is worse than failing to make one (of many possible) viable ideas succeed.

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Re:Investment increases your risk by soneca on Friday December 27, 2013 @09:49AM (#6970756)

This is something I worry, but I am still convinced it is not time yet to quit or pivot. I have 5 clients: 3 are on a 3 months free-trial, 2 are paying about $80/month, starting in January.

For some context, my product is a loyalty program for bars and restaurants based on Facebook's check-in. I talked with 50+ restaurant owners, and social proof is very important. But i also learned that no restaurant is totally satisfied with my competitors' products. I learned where I need to perform (final customer's adoption, as it is a B2B2C product). And I am testing my premises on these 5 clients. These next two months will be crucials to validate my business. I actually put a hold on sales to take good care of these clients. If in two months there are willing to pay for it and let me put their logo and cases on my marketing material, then I have a business. If not, then it is time to quit (or pivot). Either way, I still need a month or two, at least, to know if it is a good idea (or if I am good enough executing it). So I am taking this angel money to validate a promising idea. Sound exactly what angel investment is designed for.

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Re:Investment increases your risk by swombat on Friday December 27, 2013 @08:37AM (#6970536)

So, there is no way I can be profitable before March or April. Not with this business, for sure. If you have a business idea that requires many months or years to get off the ground, and you don't have the resources to sustain yourself during that period, though, I'd argue the idea is out of your reach: http://swombat.com/2012/1/19/idea-reach-cofounder-myth

In your position, I would pick a different business idea.

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Re:Investment increases your risk by gxespino on Friday December 27, 2013 @08:47AM (#6970568)

In his current position you would advise towards starting over with different business idea from scratch. One that would generate money from day one and need zero money to start.

Yeah.. I'd say take the funding.

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Re:Investment increases your risk by MDS100 on Friday December 27, 2013 @09:14AM (#6970651)

Or Consulting/Freelancing. It's very much possible.

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Re:Investment increases your risk by soneca on Friday December 27, 2013 @09:40AM (#6970731)

I did some freelancing. A two-week job paid my November bills. It was a good emergency revenue, but it is a palliative solution. It is hard to find such jobs, it is unpredictable and also distracting.

I still prefer the angel investment.

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Re:Investment increases your risk by mswen on Friday December 27, 2013 @09:29AM (#6970692)

That is what I am doing currently to support my start-up. One steady client that pays well and is willing to work with a somewhat flexible commitment from me at about 10 to 20 hour per week. And with careful spending that will pay bills for my family.

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Re:Investment increases your risk by bananacurve on Friday December 27, 2013 @09:39AM (#6970728)

People who haven't been broke recently often forget what it is really like. I mean how can you be worried about something as ethereal as investment risk when you can't pay your bills. This is premature optimization, there is no proof of value yet. Take the money.

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Re:Investment increases your risk by nahname on Friday December 27, 2013 @08:56AM (#6970596)

In a Saas, you are basically doing custom application development for your first few customers. If your customers won't pay $100 a month for that, I would be concerned about business validation.

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Re:Investment increases your risk by dsirijus on Friday December 27, 2013 @08:42AM (#6970553)

From my experience, being desparate pushes you extra, true. But you hit a wall, since you've just spent a lot of your time chasing urgent and important instead of not urgent and important, which is preferable long-term strategy.

I could make a house building analogy here probably.

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