First VC discussions after two paying customers - anyone with any tips?
I've been working on Polkadot Tiger (SEO A/B Testing SaaS) for two years now and we launched in March after a 3 month beta.
It has been a slow but steady launch and we've got our first two paying customers which was a huge milestone by itself. Unfortunately after self-funding the project full-time for 18 months my funds are almost depleted and PDT is not yet in a place to sustain me despite a promising start which means I'm looking for some funding to be able to keep focus on this full-time and not have to go back to juggling client work with what I really want to be doing.
We're in early discussion with a number of VCs as well as some angel investors and although we have commercial validation I fear it isn't enough quite yet.
Has anyone else gone through a similar situation or been on the other side of this conversation as the investor?
I'd love to hear other people's experiences or tips in relation to this? Thanks in advance!
Hey Jamie, went through a similar situation and was sort of on the verge of "shall we take the cash?". Now the crux of the problem is, once you take the money - you commit to exponential growth, unless its a calm investment vehicle like Tylers Earnest Capital. A few things to consider: 1) If you are coming from a position of desperation (I need the money) - you will get worse terms and worse negotiation position 2) If you are uncertain yourself if the business works - is it really a good idea to take on money? Usually you take it to fuel growth, but with 2 paying customers you still don't know if its a venture model or indie model. The difference between the two is - for a fund to generate a return, they need to bet on companies who can make them a billion back, think Google or FB scale or the fund doesn't generate a proper IRR (internal rate of return). 3) Angels - different story - they can actually just risk because they like you and see if it works out.
I think it really depends if you have a strong conviction that the money will help with further growth / sales and can funnel revenue for you to be comfortable and working full-time on this then definitely try to get it. But have a very candid discussion with the investors on where you expect the company going and what are you building, as many can expect astronomic returns and you may just want to build a lifestyle business. 2 clients is not a validation yet (perhaps only on enterprise level) but you can go on and see if you can get more to justify the investment or your personal conviction.
@kirso thanks for the feedback, it is very useful.
The money is not the only reason we are looking for investment, it has just hit a point where I am unable to continue to fund the resources we need to grow quickly.
I do believe strongly this product has huge potential for growth as we've spoken to many other businesses and potential clients who are interested but want it on a platform that we currently don't integrate with for example.
A major reason for seeking investment is to expand the team to add the resource required to deliver features that we know will make a difference.
@MakingJamie In that case I strongly suggest to either look for angels, FFF or try indie funds like Earnest Capital or TinySeed.
For VC, you need to show that you can get to a billion and its a large market + you are a bit early. If you really decide to go for a VC I suggest to drop a deck to Hustle fund - they are probably the best for your stage and are just an amazing bunch. However, but taking venture capital you are committing to a very specific route of growth and pressure.
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