

Entrepreneurs Get Creative to Get Funding - Mrinal
http://online.wsj.com/article/SB10001424052748703790404574471433151548294.html

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fuzzythinker
A $90k for 25% stake seems to devaluate the initial $500k investments. Are
initial investors usually ok with this type of devaluation, or are they just
happy to see more funding since they don't want to put more money into it?

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leelin
I'm guessing it's a mistake in the article. End of Summer was not too long
ago, so a company with about $500K in the bank should be worth more than $270K
premoney.

I just thought of another explanation: Maybe the TV show only airs if a deal
gets done, so the founder reasoned the publicity was worth a bad valuation?

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joez
I doubt the part of accepting the money for publicity. I think they get plenty
for just being on a nationally syndicated show. (Kudos to them on WSJ and
Shark Tank) They might have even gotten better publicity for standing firm on
their original offer.

<http://www.youtube.com/watch?v=SOSfMzwA5C0>

They accepted an offer with a 6 month buy out clause so it is possible they
never intended on keeping the money.

I just have major doubts about their numbers. The way the founders present
them is very suave but thinking deeper in is really questionable.

Other highlights from the show are in: They had 40% of University of Arizona
(about 14k users) in 8th months.

30k revenue in 1 year.

Not exactly a smashing success, but a start. Just a few doubts when examining
them deeper.

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leelin
The article seems to contradict itself; Shark Tank gave them a $270K pre after
they "walked away with $500K in investments" at the end of the Summer? Maybe
they meant all investor owned equity is now 25%?

    
    
      Notehall.com, one of 10 ventures chosen to participate in
      the three-month summer program, walked away with about
      $500,000 in investments.
      ...
      Through the show, which aired Notehall.com's episode last
      week, Mr. Conway landed the company an additional $90,000
      after agreeing to give up a 25% equity stake

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theklub
No the Sharks usually only invest if they are getting a sizable percent of
ownership so I think that's correct. They must have needed the money pretty
badly.

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mediaman
I wonder why on earth someone would burn through $500k in less than a year to
develop a class notes sharing site, given the developer abstractions available
today.

Maybe he tried to launch a blitzkrieg marketing plan in many different
universities at once, with little testing or compartmentalizing?

Maybe just too much staff?

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dirkstoop
I get the feeling from the article that there's something very wrong with this
particular startup, or at least the founder in question.

"No turning back" sounds like a poor excuse to keep dragging a startup along,
trading 25% and a boatload of your time through some investment TV show for
just 90k sounds like you've given up on actually working your ass of to
develop the product/business, or for that matter, actually being sort of in
charge of it if it somehow does manage to survive.

The low valuation is not the problem, but twenty-five percent at that
valuation? Better do some consulting to scrape that cash together. It might
make sense in some situations, just sounds like a bad deal to me if you also
have to be on some TV show to actually have a chance at getting it.

The article is rather light on details and – as others have already pointed
out – on math that makes sense, so I might be getting the sitation completely
wrong, but this just strikes me as a really poor way to run a startup.

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spokey
That line jumped out at me too:

"I had invested my life savings and I knew there was no turning back," says
Mr. Conway, a 2007 graduate.

Life savings? 18 months out of college?

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mattmyers
I have it on good authority that most of the deals on Shark Tank don't
actually close- it's just good TV. In which case Notehall was "stupid like a
fox" and doing it just for publicity. They were the top Google trending term
the next day.. better bump than most blogs will get you.

