RSS at Feed BurnerBe like Dr. Evil
In Austin Powers, Dr. Evil plans to “hold the world ransom for… 1 MILLION dollars!” He is laughed at because the amount is so small. He later increases his demand, but you could take a lesson from this. Don’t try to request too much money when you are starting.
I see many entrepreneur’s seeking seed investments that want to get enough funding that will take them to profitability. There may be reasons why you need to get all of the money up-front, but I would highly advise entrepreneur’s to consider seeking a smaller amount of money from the beginning. Why?
1) Your estimation on the amount of time and money it will take before you are profitable is likely much lower than it will actually take. You will likely need to get additional funding in the future even if you think you will have enough. So trying to only require one round of funding may be pointless anyway.
2) It will be much harder to raise the amount of capital you seek if it is too high. First, most angels (or angel networks) prefer to invest in deals under $1 million. Plus, the less you seek, the more likely you are to find the sweet spot of more investors, which can only create a better situation for you in terms of speed in which you can get funding, deal terms, etc.
3) Related to #2, getting the funding quicker will allow you to begin work on the business and spend your time on what actually matters. Wasting your valuable time trying to raise a million dollars when you could actually get 6 months out of $150,000 may not be the best idea.
4) One of two things will happen once you get started. You will start seeing some success and you will have evidence that your idea is valid and has big potential. The other option is that you won’t see this success. If you can’t prove the idea has potential fairly quickly, then you are likely going to have problems with your entire business, not just when it comes to getting investments. If you can show your idea has potential, getting additional funding is not likely going to be a problem. People are much more willing to invest in a proven concept than a simple idea. In addition, you will probably be able to retain more equity since you will be able to increase the valuation of your company. If you had received all of the money at the beginning, your valuation would have been lower and the equity would have been more expensive for you.