

Ask HN: When to raise from angels - Murkin

Hello everyone<p>What is the usual stage for a Web startup to start approaching Angels for investment (50-100K$).<p>Is it normal to do it during development (Which, for web, mostly can be done on "Ramen"), or do it once you launch and have some traction (not revenue) ?
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swombat
The simple rule is: do it as late as possible.

The longer you can delay fund-raising, the less of a share you'll be giving up
(or the more money you'll be getting for it), and the stronger your position
(presumably). Some businesses raise money on an idea. Others raise money once
they have a product with traction. Others never raise money at all. None of
those approaches are wrong, but the cost of funding definitely decreases if
you wait and decrease the risk on the table.

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cperciva
_The simple rule is: do it as late as possible._

I'd add a rider to this: Raise money as late as possible, _but no later_.

Yes, the longer you wait before raising money, the better the deal you'll
usually get... but only until you reach the point of "we need to raise this
money or we're going to go out of business". As PG has said on several
occasions, the term "angel" is a misnomer; they're sharks who can smell blood,
just like any other investors.

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pxlpshr
From my experience, seed money from an angel generally doesn't take that much
equity from you in return for giving you the ability to confidently work on
your project (ie: pay yourself a micro salary, hire a person or two full-time,
etc.). In most cases equity is going out the door -- you either give it to
your angel in return for cash to make hires, or pay early-employees with more
generous equity since you lack cash.

One thing that is particularly important to me is finding an angel that meshes
well with you/the company, that you can learn from, and that can do a lot for
the company once the product launches such as VC introductions, pull strings
for marketing, product advice, etc. The right combination + luck may mean you
can avoid VC money all together, or retain a lot more of your company during a
series A. To summarize: someone that brings more value than just cash,
therefore also deserves a decent equity position because of the additional
value they'll return to the company in the future.

So to follow the advice already given, yes raising money late can be good but
it can be a timely process. If you're picky about your angel then it will take
even more time to find the right person, so you should start
talking/networking as soon as possible. It took us almost 8 months to close
angel money because of the "interview" process.

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Thyraon
In addition, I think it's wise to wait with approaching investors (be it
angels or VC's) until you have some actual stuff to show them. People (and
especially investors) are hard to get enthousiastic with only an idea, whereas
a pilot/demo can really trigger them to see the success in your startup.

A friend of mine did the same thing and simpy used screenshots of a static
HTML-version of their web-app to show the VC's, and even that was enough to
get them to invest.

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Aegean
I would do it only when absolutely necessary and there is no other way going
forward.

I have a feeling that some people think about approaching a VC just because
there is so much stuff written about VCs and funding and it seems necessary. I
think it is not something you can't do without, and as other posters
suggested, it's best to do it at the absolutely necessary point, if at all.

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phsr
When I do begin to work on my own startup, I plan to bootstrap as long as
humanly possible. I want to avoid OPM (other people's money) as long as
possible. Things will get a lot more complicated when you have other people to
answer to

