Can I approach Angels even if my associate and I have absolutely no cash?


3

My associate and I are doing a website and we have absolutely no cash.

Altough, we made a demo, "a prototype" of our website.

Would that demo and a solid pitch/business plan convince an angel even if we don't put any cash but our complete dedication to this project ?

If yes, do I have any chance to get at least 50 % of the stake ?

Angel Investors Bootstrap

asked May 15 '12 at 21:24
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Younès
120 points
Get up to $750K in working capital to finance your business: Clarify Capital Business Loans

1 Answer


2

You can always approach investors, but keep in mind that the less you have on paper and planned, the less equity you bring to the table and the more of the business you'll probably have to give up in order to get monies.

If you want successful investment, you might consider a well thought out business plan, which includes things like income projections, costs, current valuation of the business, future valuation of the business, how soon you'll reach profitability, and what you'll do with the monies.

Most of the time, investors are very keen to invest in something that gives them a return, and the less information and market research you have to show this, the more of the business you'll probably have to give up in order to get fewer funds. Showing an investor how a $50,000 investment will net them $100,000 in 3 years, and another $20,000 each year after that is much better than just saying "we have an idea, we think it will make money, but we have no idea when, how much, or for how long"

When pitching, do make sure you're honest, and simply lay out the expected costs, potential roadblocks, any competition, and how you plan to differentiate yourself.

Hope this helps! Let me know if this isn't clear.

EDIT:

Also keep in mind that businesses (especially Corporations) work on a valuation system, so the stock you own is proportional to the value of your contribution, meaning that if you can value your contribution as 100 hours at $50 per hour, your contribution is $5,000. Asking an investor to add $10,000 would mean your contribution is work 33% of the business. If you want to not base ownership on contribution, you might consider an LLC, which is much cleaner about how to distribute funds, regardless of contribution. Just more food for thought.

answered May 15 '12 at 22:23
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Madd Hacker
493 points
  • So I should provide a business plan along with the pitch, even if it's not read. So if our work so far can be valuated: would it be preferred to get funds in a beta-test stage rather that in a prototype stage ? – Younès 8 years ago
  • Having little knowledge of what you're doing, I think that you're best suited to provide that information. Ideally, you want to be able to show that your concept has value, why it has value and a reasonable estimate of what that value might be. Keep in mind that most people you talk to won't want to wait a long time to get something running, so personally (especially with software) I tend to avoid trying to get funding until I need to grow. However, if your business requires capital to start, it might be a different story. If you can provide more context, I'm happy to provide more thoughts – Madd Hacker 8 years ago
  • Thanks for your advices. It's about a dating website. My goal is to build (4 months max) and launch a beta-test version in order to get users satisfaction about this "different" dating website concept. If feedbacks are positive, it would help to raise more funds (mainly allocated to webmarketing). – Younès 8 years ago
  • Given that information, I would definitely get a beta up and running before I work with an investor. This will help them see why you're different, and gives them the capability to give you funds to market the site. Given the number of dating sites out there, showing something not in beta might be hard to sell, simply because of the "drop in the ocean" problems. Honestly, other than time, your costs should be minimal, and even if you don't want to get it hosted yet, you can show your local demo (but I would try to show a hosted, working site). If you have clients, even better. That help? – Madd Hacker 8 years ago
  • Yes, I understand the "drop in the ocean" problem and stacking the odds in my favour. – Younès 8 years ago
  • Sounds good. If that answers your question, please mark the answer accepted. Cheers! – Madd Hacker 8 years ago

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