

Ask HN:  How do I approach investors? - norcode

Hey guys.   I'm at kind of an interesting point that I have never really made it to with any of my previous projects.<p>Without getting into too much detail we've developed a mobile application with some pretty heavy server technology behind it capable of gathering very interesting crowd-sourced information.<p>I have a few customers lined up now ready to go, however capital to buy all the tablets I need and continue to pay my developers while we build this is becoming an issue very quickly.<p>What should I be doing from here?  I mean really all I need is $50k (for now), which doesn't seem like a lot, but to a startup corporation it is next to impossible to get that from a bank or lending institution.<p>I'm based out of London, ON and there isn't a lot of venture cap's or angel investors floating around up here.<p>Any advice would be appreciated at this point.
======
trussi
Friends & Family (F&F) is the quickest and easiest. Spread it out over several
people and spread it out in 3 month payments. Make sure you set very specific
milestones and a very concrete go-no-go milestone, so you fail as quick as
possible.

I'm assuming you're a smart person who can make $100k+ in a real job. If so,
add a guarantee that you'll pay back the full borrowed amount within one-two
years if you don't make the go-no-go milestone. This option opens up more
funding sources. For example, an older relative with savings in the bank near
retirement will need that money, but not for a few years. If it were a typical
investment scenario where the money was borrowed and if the company failed,
the money was not repaid, that person could not invest because they need the
money.

The other option is to get a loan from a local business development
department. I don't know what ON looks like, but most cities in the US have
these types of BD programs that have a goal of creating jobs in the community.
Relatively easy to get, just have to jump through a few hurdles. The
requirement in my town is the "get rejected by a traditional funding source."
Haha...that's a pretty easy thing to do!

I would be very hesitant to receive any money from a professional investor at
this point in your startup. You'll have to give away too much of the company
and you'll have a boss that has your balls in a vice for the rest of your time
at the startup.

Wait for professional investment until your profitable and then it makes way
more sense.

Keep us posted!

~~~
norcode
You hit the nail on the head and I do believe I can probably round up the
money from friends and family in the shape of a loan. Especially with the go-
no-go system laid out in place ready to go.

The idea of small 3 month increments working towards it is also very
appealing.. Thanks for the solid advice.

 __EDIT __I also noticed that you recommend staying away from investment firms
in order to preserve control of the company, but I'm honestly a bit scared to
grow something like this myself with my limited experience in this area. Do
you think my chances for success change at all with a 'professional' at my
side?

~~~
trussi
There's a big difference between investors and a support network.

Very few (any?!) investors are really going to help you with the grunt work of
making the business successful.

Never assume that a good investor is a good operations person or a good
marketer or a good visionary.

I love working solo. Less distractions. Less wasted time. The only person I
have to argue with is myself.

That is not to say I don't have help; I just use strategic help for specific
purposes.

I found a bad-ass marketing guy that helps me develop my marketing strategy. I
use him when I need him. No equity or long-term commitment.

Same for infrastructure issues and sales strategies.

I have people that hold me accountable to keep me laser-focused.

To answer your specific question about professional investors helping your
chances of success, it depends on your definition of success.

If you're trying to build a lifestyle business (highly recommend), then
investors will explicitly block your success.

If you're trying to build a high-growth, 3-5 year exit business, then
investors _might_ be able to help.

I would still stay away from early-stage investment though. Use professional
investment for the growth stage; this is the place where their experience will
be directly relevant to your objective (fast, hard growth).

~~~
norcode
During my trials and tribulations of the past week I came to realize the exact
same thing you posted here.

I am now looking at strictly friends and family to get the initial startup
capital I need until I can properly valuate what we have here.

Great advice!

------
martinshen
Hey norcode. You're pretty close to Toronto. There are a lot of angels near
there. Hit them up. I'd recommend talking to the StartupNorth guy, David Crow.
I'd also recommend talking to the Globalive guys... specifically Anthony L.

There are also a whole number of incubators you can talk with in and around
Toronto (and Montreal). Year One is a good choice but take a look around.'

Im originally from Toronto but I'm out in SF now working on my own startup,
UpOut. Let me know if you need extra advice (martin at UpOut)

~~~
norcode
I will certainly check them all out. Thanks for the comment.

------
dirkdeman
Have you applied to Angellist yet?

~~~
norcode
__UPDATE __I've read some very mixed reviews about using sites like this. It's
really hard to apply the garbage filter.

There are definitely some investors that seem solid though. Thanks again.

~~~
martinshen
Angelist is useful once you have 1 investors. Investors follow standard herd
mentalities... that's why angelist works... probs not for Canada.

