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Raising Money for a Tech Venture?

Posted by Cliff on from the entrepreneurial-necessities dept.

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?"

3 of 50 comments (clear)

  1. If I had a choice between by Mordant · · Score: 5, Funny

    dealing with my relatives as part-owners of my business, or a horde of rapacious, money-grubbing VCs as part-owners of my business, it would be no contest - I'd vastly prefer dealing with the VCs, hands-down. ;>

  2. Take the money by torinth · · Score: 5, Insightful

    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.

  3. Vulture Capitalism by JMandingo · · Score: 5, Insightful

    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."