

Ask HN: Bootstrapping. An angel begs to invest 100K. Should I accept? - throwaway5768

I am bootstrapping a startup. I can grow organically (but slowly) with my own savings/revenue. I met an angel investor yesterday in a dinner. I told him about my startup and he asked (almost begged) if he can invest $100K (we have not talked about %'s yet). As I was not looking for external funding, this came by surprise.<p>The angel doesn't have experience in the field of my startup but he is well connected.<p>Would you take the money? Is there anything inherently good about being bootstrapped apart from the story?
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patio11
Personally speaking? Much like getting a surprise offer of marriage from a
person on the street probably shouldn't change one's immediate plans, a
surprise offer of investment probably shouldn't change one's immediate plans.
Do you have a good handle on what changes in your life/business with $100k in
your pocket? Is that a positive change? If you don't have good answers to both
questions, table the offer for now.

You were going to execute on the startup. So, execute on the startup. Suppose
you decide "Yeah, come to think of it, taking investment (and everything that
goes with that) really makes sense for you, then you will probably find it
still available in the future, from this guy or somebody else. It is unlikely
you're going to get _worse_ terms three months or six months from now, when
you've added N more quanta of value.

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atgm
What would you use the money for? What does the angel investor expect from you
in return for the money?

Without answers to those two questions, it's really hard for anyone to decide
whether it's a good decision or not. There are always strings and charitable
people always get something out of their charity, regardless of whether it's
simply good feelings (I'm a good person, I helped someone, my money is going
to a good cause) or something material (I'm going to control some of this
company).

If you feel like you can use his connections, perhaps you could tell him that
you don't feel comfortable accepting money at this point, but it would really
help if he could connect you with some people.

Essentially, I'm seconding what Michael Dorfman said.

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jacquesm
I would keep the door open and figure out what possibilities such a change in
your plans would bring.

If after careful consideration (no need to be in a hurry here if this offer is
good it will still be good three months from now) you think that on balance
you're going to be better off by taking this guy on board and you have an idea
of how much your company is worth then you can start to negotiate a
percentage.

Be prepared to walk at any stage, it's apparently a sellers market so you can
afford to play it pretty hard.

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gyardley
_Is there anything inherently good about being bootstrapped apart from the
story?_

Well, the first point is obvious - should you eventually sell it, your
ownership will be higher if you haven't taken outside investment.

Depending on how the money is raised (convertible debt? purchasing common
stock? purchasing preferred stock?), your investor will also have a variety of
rights relating to the control of the business, which can potentially
constrain you down the road.

Taking $100K in convertible debt is a lot easier to stomach than taking $100K
and issuing a bunch of preferred stock for it.

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indrax
He thinks your valuation is too low. Raise it until he's iffy but still
willing.

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spinlock
You should think of investor money as rocket fuel. You only need it if you
have build your spaceship, charted your course, and now want to get there
fast. If you don't know what you would do with the $100k, don't take it. But,
even if you don't want the investment right now, talk to this guy and see what
a deal would look like. The best time to educate yourself about the
fundraising process is when you don't need the money.

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stefanobernardi
Talk with other angels, validate your idea and mode and take the money. You'll
always have time to pivot and change the plan later. If it scares you, it's
normal. Keep the percentage around 10-15% and don't give governance rights.
And if you fail, try again.

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thewordpainter
if you take the money, i think it's uber-important to specify what kind of
role he will hold. once you take the money, he will expect some sort of say
when it comes to the direction of the company.

if he doesn't know your industry, you may receive a lot of "advice" that's not
worth implementing.

building on some of the other comments, figure out exactly what you would
spend the money on. don't work backwards from 100k...work from zero --> up. no
need to force yourself to reach 100k in spending if you don't need to.

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Charuru
Yes you should take the money if the deal is good and you have a good
relationship with the angel. External funding validates you and make you
easier to invest in in the future.

Also it might give you more opportunities, even if you can't think of ways to
deploy the cash now, having that cash will give you ideas.

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michael_dorfman
I disagree.

I would say: take the money _if and only if_ you have a clear idea of how the
100k will accelerate the growth/revenue/profit of your company. Cash without a
plan is a big distraction, and will likely throw you off course as you try to
think of ways to spend it.

If you've achieved a scalable, repeatable business model, great: use the money
to accelerate growth.

If you've got an idea for a scalable, repeatable business model, but need cash
to implement it, great: use the money to do so.

If you're still experimenting towards a scalable, repeatable business model,
and you've got some ideas on how the money can help you find it more quickly,
great: use the money to do so.

If none of these apply: turn down the cash, gently and gracefully, and accept
all the advice and connections you can get.

What is inherently good about bootstrapping is the control it gives you.
Investor money comes with expectations and responsibilities and some degree of
loss of control. This can be a good trade-off, or not, depending on what you
get out of it.

