
Ask HN: What do Angel Investors or Seed funds care about? - codegeek
I have always thought about this situation. Lets say you are running a company that is on track to do $5M in revenue in next 2-3 years (based on solid patterns being bootstrapped for a while). It could be scaled further with a little bit of extra cash injection AND new support structure like investors who are experienced. Does it make sense for such company to try and find investors at this point ? Do investors exist for such companies or the only option is small business loans ? If in 10 years, this company could hit $15 Million in revenue, is that too small for angels&#x2F;seed fund investors ? I know it is not worth it for larger investors or VCs but wonder what the options are for such companies.
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davismwfl
So this is typically where high net worth individuals (HNI) come in, aka,
angels but not your typical tech angel and not seed funds IMO. I would argue a
very large unreported, under discussed part of funding for traditional
businesses is done this way, but it doesn't have the sex appeal of tech angels
and VC's so people don't hear about it and the press doesn't cover it.

It is not rare to work with a HNI and they infuse you with say 50-500k for
growth based on your business metrics. How they structure the deal can be very
different, it can be anything from a "loan" with monthly payments starting
usually after some number of months or it could be as ownership via shares or
Units (for LLC's) and quarterly or annual distributions based upon an agreed
to valuation. But there are almost an unlimited other numbers of ways this
gets structured.

Not everyone is looking for 10x returns, a lot of HNIs will invest as sort of
a paying it forward (they want people to succeed), but don't be misled they
are still looking for solid returns. An example, I did one of these deals with
an HNI where for every sale we made they took a percentage of the sale. Until
the principle was paid back it was a higher percentage but it lowered once
principle was paid back and the return was capped at a total value/time
whichever occurred first e.g. they could get up to 4x their investment back or
it stopped 5 years after the principle was repaid whichever came first, they
were also guaranteed a specific return if we sold before either of the
triggers happened. This deal worked for both of us, because as we succeeded
they got paid and they were incentivized to help us succeed because they could
get the max value out sooner the faster we grew.

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ReD_CoDE
We're in the mock-up stage and has started negotiation with on of well-known
VCs in Silicon Valley

So, based on our condition do you think which deal is good enough?

We have a $1.5 trillion annual Total Addressable Market - TAM globally in
smart cities market and we have chosen a company as our beachhead market
strategy that has 1 million customers which if accepts our solution we will
have $2.5 billion annual sales which would be between $250 million annual
income

We need around just 500K users to become a unicorn

So what's the best strategy today for us in the pre-seed stage?

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askafriend
> We have a $1.5 trillion annual Total Addressable Market

FWIW, anyone who throws out ridiculous TAMs when trying to sell their idea is
an immediate red flag. It's a poor and over-used tactic.

