Investor and Startup. Why? When?

Why do we build companies? For money. What’s the goal of every business? Earning money.

Why do we build companies? For money. What’s the goal of every business? Earning money.

Not raising money from investors. But earning.

“Venture Capital should fuel your company, not your ego”

Danielle Sacks on fastcompany.com

Money from VC should help you in building a company, that will earn money.

Who’s an investor?

Lots of people treat them as a devil. They want to come to your company, put some money in it, don’t do anything important and still want to tell you what to do and how to do it.

Of course that’s not the truth.

An investor is a businessman. A man, institution, company, which looks for a profit. They’re looking for an opportunity to invest some money to earn much more money.

One will buy stocks and try to earn money on the stock market. The other one will look for some business/startup, that has the potential to grow.

Is it worth talking to investors? Is it worth looking for an investor?

Yes, of course it is. But you need to look for it in the right moment.

Because what does raising money from an investor mean to you?

  1. More expectations. Earlier on you could treat 5k UU, 100 accounts and $10k monthly revenue as a success. If you have an investor – you need to think big. They don’t invest in you because they want to earn a couple of thousand of dollars. They want to earn more, much more than that.
  2. Sales. Earlier on you could focus more on design and developing functionalities. An investor wants money. Money means revenue. Revenue means sales. If you’re not a great salesman, you will need to hire one as soon as possible.
  3. You won’t be able to do whatever you want. You can think about an investor as a co-founder. It doesn’t mean that they will tell you what to do, why and when. But they will be a part of your company. They will want to know about everything what’s going on. They will want to know what your plan for a near (or even later) future is. And if they won’t approve your plans – they will tell you about that. An investor is a partner in business. You need to build a plan that both of you will approve.

When should you go to the VC?

Simply… when you’re ready. I recommend to follow these 7 simple steps:

1. Find a co-founder

Don’t try to do everything by your own.

With a co-founder…

You will motivate each other.

You will develop a better product.

You will look much better for the investor.

2. Build a product, MVP, prototype or whatever

An idea is just an idea. As long as you don’t have an idea for a remedy for a cancer – it’s worthless.

At the stage of an idea you don’t even know how the whole product will look like, how it will work, if it will be useful for anyone or even if you are able to build what you want.

Build something. The product could be worthy to invest in it, an idea is worthless.

3. Tell the world about your product

Inform the media about your product, put some information on social media, tell your friends about that. Gain as many users as you can.

4. Get feedback

You build this product for users. Listen to what they have to say about that. Do they like it? Don’t they like it? Why? What would they change? What would they remove? What would they add? What functionality is the most interesting and useful for them and what’s not? Listen to all the opinions and write them down so you won’t forget them later.

5. Fix everything that has to be fixed

There’s no chance that your product will work perfectly. You (or your users) will find bugs.

Fix everything that could be fixed. As soon as possible.

6. Stand out

I can bet that there is some similar product on the market. That you already have at least one competitor. Or even… if there are no competitors today, someone else is trying to solve the same problem right now.

So trust me – you need to find a way to stand out. That could be a functionality, developer-friendly API, design, a dozen of add-ons and widgets, easy-to-use interface. It has to be something.

7. Start to earn money

Investors prefer to invest in a company that already earns money. That’s a fact.

The second thing is that it’s worth figuring out if there’s someone in the world who’s able to pay for your product. If there’s someone who thinks that your product is worth their money.

Now sit down and answer these three questions…

  1. Are you still able to develop this product on your own/without raising an investor’s money?
  2. Are you able to make your business grow/without raising an investor’s money?
  3. Are you able to sell your products or services on your own/without raising an investor’s money?

If your answer is “YES” for all of these questions, than it’s not the best time to raise money from an investor. If you answered “No” for any of these questions – you should start to look for an investor.

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