

Ask HN: Funding Strategy - Bootstrap or Angel? - bloomshed

I'm at a crossroads with my app and I'm looking for some insight from those who've come before me.<p>I've spent most (OK...all) of my meager family investment seed money ($3K) on a very basic demo that essentially "secures" the most sensitive IP for my concept and demonstrates the core defining feature of the app.  I know that coding something probably in no way protects a concept, but I felt like I had to have something real to show investors because I'm not a programmer and this is my first project/startup/attempt-at-something-awesome.<p>My question is what would be the best use of my time moving forward?  Should I keep pitching friends and family for cash to add more power to my demo?  Should I work on developing a great presentation for angel investors?<p>I feel like the window of opportunity for my app is probably 10-12 months from closing.  If I'm not in the market by then, I'll be toast.  I've been working on the idea for the past 14 months, I know what I want to do with it.  If you were me what would you do?
======
lsc
If you can't code, and you can get funding, you probably want to try to get
funding, then use the funding to attract talent.

Really, you want a technical co-founder, but if this is the first thing you've
done and you don't have cash, that will be difficult. A business guy without
money is like a technical person who doesn't have completed projects on his
resume.

~~~
bloomshed
Finding a technical co-founder has been surprisingly difficult as I've worked
through my network of college buddies. The project is risky and I think my
buddies who are also trying to establish their careers are more tentative than
I thought they would be about this.

The people who like this project the most are the industry contacts I've
pitched to. Essentially I've got three believers in my product: the IP lawyer
I consulted with in fall of '09 when this whole thing started, the former
coworker who is also a "guerrilla-style" marketer/graphic
designer/photographer, and my current coder who I've contracted to do $2K of
work to build the alpha prototype.

As far as investors go, I think the recession of '08 shook people's
perceptions of Wall St. and made it easier for startups to argue for funding
from individuals. I make the case of, "Hey, you lost how much in your mutual
fund? This product is a high risk to be sure but the potential return for a
small amount of cash is astronomical." I never say those words exactly of
course but that's a theme of my financial argument to investors.

Its very very cheap to start a web company and I'm trying to run it that way.

As far as my status of being a nontech guy without money, that's true to a
certain extent because I have no formal training. I have been working a lot on
developing the marketing and product design end of things. Graphic design has
been a hobby of mine for a long time so I've been doing all the initial UI
design. I guess that's my "sweat" contribution to the thing so far.

There's always talk of "value" with startups. I would argue my "value" to my
startup is in the fundraising, conceptual development, and UI design end of
things. I communicate well with investors, I'm comfortable speaking to people
because of my teaching experience, I know the difference between selling and
educating (thanks to two failed attempts in sales) but I can do both if
necessary. I also have talent in graphic design and can create meaningful
mockups to guide coding development. People pay for those two functions in the
industry. A lot of R&D money goes into developing ideas (Google Wave anyone?)
so the conceptual work I've been doing is also not without value.

The only difference is that I don't have formal training so it takes me longer
to develop these things to industry standard formats because I don't know what
developers need to create a quality product. I'm learning though.

~~~
lsc
I'm not saying you don't have value to bring... just like the programmer who
hasn't yet completed a major project, you might be brilliant, but you might
not be. The thing is, choosing a bad/useless co founder is nearly always fatal
to the venture, so people can be a little conservative.

If some business guy without money approaches me and claims he knows how to
raise money, well, maybe he does and maybe he doesn't. How would I know? but
if the same guy approaches me and can prove that he's already raised $bignum
dollars from various investors, then I at least know he's good at raising
money. I mean, that's not the whole of the business guy job, but it's
certainly an important part.

~~~
bloomshed
I hear you. No worries.

I've been running into some dominant themes on HN as I've been participating
and learning. This is my first project so usually when I say I can't code,
HNers say, "Well you have no resume and can't code, so what value do you
bring?"

Since I'm applying for winter session, I want to let the selection people know
how I respond to those questions because I'm sure they have similar concerns.

------
hasenj
Don't throw money on an idea .. way too risky if you're not technical and you
don't have a technical co-founder.

That's not how things work.

Programmers can afford to start startups because the biggest chunk of
investments comes from their own talent; the fact that they can sit down and
hack something.

Business guy + idea + money + employees? Can't imagine that working out very
well. Unless the idea is simple enough and the technology is not in itself the
main product.

I mean, seriously, you spent 14 months on the idea? How do you know it will
work? Sounds to me like you're putting all your eggs in one basket.

This is another reason why programmers can afford to start startups: they can
change the idea quickly, and they wouldn't be in a position where they
invested a lot of money in the previous idea.

Where as, if you just hire developers to develop your idea, and then it turns
out that it won't work very well, you'll be in trouble because you now wasted
all that money on it and you don't want to just throw it away and try
something new. OK, maybe you will be able to switch your idea once, but you
can't do that all the time, you don't have this flexibility.

So get a technical co-founder. That's my only advice.

~~~
bloomshed
Thanks for the response!

I hear you. The reason I'm pursuing the project is because the product is
nontechnical, cheap to build, and has mainstream appeal. There is no rocket
science involved here. I'm taking existing tech and combining it in a new way
that I think (and everybody says this, I know) could be really exciting.

I am looking for a technical cofounder and I might have one with my current
coder. We're just phasing our way through the initial build of the site to see
if we work well together. He's had some success on previous projects but we
just met a couple of months ago. It's going to take time for us to figure out
if we can work well together. Things are going well so far, so that's
encouraging.

_______________________

Edit Note: I don't know why the comment above was downvoted. I tried to upvote
it but it stayed at 0. No offense taken by me whatsoever.

------
jeffmould
Do you need outside investment to continue development and launch your app or
can you bootstrap the launch?

Create a list of wants/needs for your app. The wants is all the features and
functionality of the app that you envision. The needs are the ones that get
you to a MVP.

What is it going to take to launch this app? Does it require outside sales, an
infrastructure build-out (servers, storage, offices), major marketing effort?

Assuming you have a MVP, I would start marketing the app to your target
market. Get some traction and even some paying customers under your belt. Get
feedback from these customers, reassess your wants/needs list based on that
feedback. At the same time, begin working on a presentation for potential
investors. You should treat your friends/family investment the same as you
treat any angel investor. Make sure all the documents are in place, whether
the investment is via convertible or straight out equity. Having your
friends/family invested, a MVP, and some traction will make getting angel
investment a lot easier. It proves you can execute on your idea and that there
is a market for your product.

~~~
bloomshed
Thanks for taking time to help me out!

I have a marketing buddy who believes the best course of action would be to
polish up an amazing presentation of mock ups and present it to some angels
because the site will probably be rebuilt after receiving major funding
anyway.

I've been operating under the idea that it's better to get something out as
inexpensively as possible and see how people respond before getting heavily
invested in the concept. That sounds like what you're advocating.

