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Raising Money for a Tech Venture?
phosphor-boy asks: "Age old story: a friend and I have a fun, part-time technology venture that's actually generating a little cash. To take this to the next level, we need to raise few hundred thousand dollars. There's good reason to believe that it has enormous potential to make money - but since it's a new concept, it's (obviously) extremely speculative, so going to the bank won't work. We've been tentatively offered venture capital funding, but would have to take A LOT more than we need ($millions!), and give up way more control than we'd like - giving up some control is OK, but we've seen firsthand how VC money can run amok, and it's not pretty. However, a few hundred thousand is more than is do-able with friends, family, and second mortgages. So to sum up: too little for VCs, (maybe?) too much for friends and family. Have any others on Slashdot faced this situation? What works here, and what doesn't?"
If you have the opportunity to close a venture deal for a few million dollars, take it. Do what you can with what control you have left, and walk off with your share of the money if you can't take the pressure anymore.
If you've made one good project, odds are you'll be able to make more. Don't be sentimental about the project and worry about control; just think about the other projects you'd be able to start-up with the money you earn from this. And if the VC does well with the project, they'll be there for your next and more ambitious idea too.
Good luck.
Beware of the following pattern:
1) You give up more than %50 of your company for the money.
2) The VC'ers put their own "crack team" of managers in place (themselves!) and pay (themselves) ourageous salaries.
3) A few months later, they have sucked all of their own capital back out.
4) The offer to buy the rest of the company for a pittance, which you accept, because you have no money and no control.
Vonnegut was right: Of all the words of mice and men, the saddest are, "It might have been."
If it really is a novel invention, you might think about patenting it. Generally speaking, patents take less money (tens o' thousands instead of millions) and that gives you some new options:
1) VC's get excited about patents - it ensures that there's a strong barrier to entry. It may make it easier to raise money.
2) You can sell your patent to another company, so you can get profit from your idea while someone else spends the capital to make it big.
If you did want to pursue this approach, I recommend hiring a lawyer. While you can patent something yourself, it's better to have an expert help craft the patent application.
Good luck.
-Peter
It's called Angel Investment. You can book about 100-500K through Angels. In Austin, they work with groups (Texas Capital Network for one). Frequently, angels can hook you up with business connections. Even though you may not think you need it, they can also hook you up with some Adult Supervision. From talking with VC's first hand, before they were VC's, Adult Supervision is more important and helpful that you probably think. Use your noodle and you can probably find out how to hook up with angels.
Since I've never been in your shoes myself, I can't answer your question without asking one myself. If you're already in the black (my assumption from your post), then what's wrong with building it slowly (putting back all the money you earn into the company) and owning it all yourself? I'm not trying to be facetious here, I'm asking a serious question (please don't mod me down). If you spoke to Warren Buffet, I'd assume that's what he'd say. Then once you have a solid product, look to sell and move on with something else. There's a benefit to slow and steady -- is Warren laughing now when in 1999 his peers were ridiculing him for not buying more blue chip stocks faster?
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