

Ask HN: Is it too early for me to find an angel investor? - chanced

I'm to the point where I have a fully-functioning SaaS (more than an MVP but not full-featured). Based on conversations I've had with a number of potential customers, they are extremely excited about giving the service a shot (as long as there's a trial period while I build up the end-user base).<p>The thing is, I'm running out of money.  I'm married, I own a house and I'm pushing 30 so "scrubbing it" for a few more months isn't an option.<p>I'm pretty confident that if I were to get in front of investors that I could convince at least one that he/she should gamble on both the product and, perhaps even more importantly, me. I'm just really concerned about getting the chance to even pitch it. I live down in the south east where the population thinks a SaaS must be something that goes on a BBQ sandwich and an angel is, and forever will be, solely biblical.<p>I greatly appreciate any/all opinions, suggestions, rants or pretty much any thoughts you may be willing to share.<p>Thanks
======
shawnreilly
In my opinion, it's never too early to start building relationships with
Investors. However, actively trying to fundraise might be a different story.
From my experience, Investors want to see Traction because it demonstrates
both Execution and Market Interest. Without Traction, the Investor is forced
to fall back on other metrics, which may or may not be good indications of a
good Investment (which does not help your cause).

My recommendation would be to work on getting some Traction before approaching
Investors, but this is all relative, and only you know when you're "Ready".
Considering that you do need money, maybe you could cut down on your overhead?
Or maybe you could barrow from Friends/Family? I would consider approaching
Investors without first demonstrating Traction as being a last resort; Mainly
because you are "taking a chance" and with many Investors, you run the risk of
a bad impression, or missing out on your "one shot".

In terms of your product, it seems like you're suffering from the 'Chicken
Before the Egg' problem, where you need to attract two different groups of
Users/Customers that rely on eachother to generate a Network Effect. In this
sense, it may be worthwhile to brainstorm and find an angle (however small)
that will allow you to build Traction. You need to get people excited. You
need to get your potential Users/Customers to realize the benefits of this hot
upcoming Service. You need to generate incentives and get people to "Sign Up"
for your product. Products that provide inherent value and solve real world
pain points are usually inherently effective in these scenarios. Point out the
pain points you will be solving, show the potential for growth, and the
Network Effect that you need will start to unfold; And it will grow
exponentially, from potential Users/Customers, to Potential Investors, and
finally to actual Users/Customers, and actual Investors.

Good Luck!

------
mayukh
I find myself in a very similar situation (married/mortgage/kid) building
product fulltime. I intend to go on till I get some evidence of traction
before I see any investors.

It sounds like your product is some sort of a marketplace where one side
(sellers/businesses) will pay and the other side will come in free. If so
that's one of the oldest games in town. And showing an angel that sellers will
pay to sell/promote their product on your platform is not going to generate
much excitement. (Sellers ALWAYS want to sell and will pay for customers if
they see a particular system/channel working).

Your challenge will be to build up the user base quickly. Identify a segment
(your customer's customer's perhaps) and offer some sort of an exclusive (you
will have to pay for that discount most probably unless your sellers are
willing to chip in)

If you do want to go the angel route immediately some options are > angel.co >
local tech meetups > cofounders lab (I've found good entrepreneurs there)

Happy to compare notes, drop me a line at mayukhm@gmail.com

Cheers

~~~
chanced
It is strangely comforting to know there are others out there in the same
boat.

>> It sounds like your product is some sort of a marketplace where one side
(sellers/businesses) will pay and the other side will come in free.

Spot on.

>> showing an angel that sellers will pay to sell/promote their product on
your platform is not going to generate much excitement.

I was thinking along the same lines. The only thing that it may do is prove to
them an initiative. On the flipside, it'll slow down adoption significantly.

>> Your challenge will be to build up the user base quickly.

Agreed. This is what is really motivating my interest in finding an investor
now. In order for me to build up both customer bases, I'm going to need to
give away the service to the restaurants and bars (paying customers) for a
duration of time (I'm thinking 3 - 6 months). Once I get enough of them
enrolled, I'll use gorilla marketing, social networks, and simple word of
mouth to spread it amongst the buyers.

The problem I have is that pushes me out 3 or 6 months before I see any sort
of revenue. On top of that, the cost of getting both user groups goes up as I
attempt to expand to other nearby cities.

Thanks for all of the points man. I sent you an invite on gchat. Hit me up if
you're ever in the mood to compare notes or need a wall to bounce ideas off
of.

------
eduardordm
chanced,

I'm also married, also own a house and I've been through this. I hope you can
get something useful from my comment. Our realities are certain not the same,
but anyway...:

I don't know why you need money at this stage, but please, do not depend on
angel investing right now. Do something that you can charge users for right
now (today!). Charge them. Are those potential customers willing to pay you
TODAY for the product to be delivered in X weeks? Do that. Do not play lottery
with your life.

Angel investors will invest in pretty much two types of startups: 1) startups
with crazy ideas that can make everyone millions or fail miserably (think
color.com) 2) startups that have a reasonable idea with good traction where
return should be smaller, but certain

That said, my opinion is for you to get users to pay you right now or try to
do some consulting and build something people will pay for immediately.

This was a very honest comment, best of luck to you.

~~~
chanced
eduardordm,

First off, thank you for the response.

>> I don't know why you need money at this stage, but please, do not depend on
angel investing right now. Do something that you can charge users for right
now (today!). Charge them. Are those potential customers willing to pay you
TODAY for the product to be delivered in X weeks? Do that. Do not play lottery
with your life.

Great advice and I wish I could follow it. My service has a co-dependent
userbase. My customers are businesses that only get value if the end-users are
present. I've asked a number of them and while they are willing to give it a
shot, they won't pay for it until the other userbase is sufficiently
established.

>>Angel investors will invest in pretty much two types of startups: 1)
startups with crazy ideas that can make everyone millions or fail miserably
(think color.com) 2) startups that have a reasonable idea with good traction
where return should be smaller

Very well put. I believe it falls into the first category but ultimately the
opinions of the angels is what matters there.

>> try to do some consulting I have been; unfortunately there isn't a whole
lot of work right now in my area & for whatever reason, telecommute gigs
aren't popping up right now.

I think I'm going to continue to push ahead and hopefully build out both users
bases in my area. It'll mean giving the service away for awhile but hopefully
that'll be enough to garnish some weight when I cold-call angels.

------
chanced
I was thinking about trying to go the angel.co route but it seems like pretty
much all of the companies there are well past their seed investment. Beyond
that, I think an in-person pitch would do me much, much better than hoping an
investor finds me on what I can only imagine is a massive database full of
startups ranging from vaporware to etsy

------
dgunn
I think you need something you can charge for immediately, like eduardordm
said. I understand that you have a marketplace of sorts where two parties must
meet prior to a transaction but it's very unclear what it is you're doing.

The fact that you have an MVP, you're already talking to prospects and there
are barriers to entry that you're having difficulty with makes me ask, why the
secrecy? People would have trouble catching up to you at this point, and even
if they did, they would face the same problems you're currently having.

This conversation would probably be much better and more helpful if people
knew what you're doing. Then their answers wouldn't be, "find something to
charge for", they would probably be, "You could probably do X for the side of
the marketplace you have currently until the other side shows up. Charge them
for that to keep you going for now."

~~~
chanced
That's a great point. I guess my fear is that if I have to get a full-time job
that it will delay me enough for someone else time to get their own MVP done.
Since the application is geo-centric, they would just need to make it into
markets that I'm not in yet. Groupon vs LivingSocial, for instance.

Having said that, I recognize that you guys are shooting in the dark. There's
very little you can do without knowing what the application is. I'm putting
together a demo to cut down on the time it takes me to present to restaurants
& bars (my customers). I'm also in the middle of making some changes based on
some initial feedback. Once I'm done, I'll consider posting it on this thread.

Thanks for your help man.

~~~
dgunn
I've made deals with restaurants/bars/chefs/etc before and one piece of advice
I can share that could be a huge help is to find an 'insider'. Not sure where
you're living, but in certain scenes (food towns) there will be an abundance
of foodies. Find one to help you.

I was in NYC when I was working on a marketplace in the food/social space and
we got an intern who was awesome. He was a food blogger and knew the lay of
the land better than I ever could. He knew restaurant owners by first name and
they knew him. He afforded us instant trust and he knew the best prospects
based on what we were wanting to accomplish.

Unless you're that guy who knows everybody, do this. Email me if you ever have
any questions. Happy to help.

