"We can raise some seed money from a private person or from venture capitalists? What do you think we should do?"
Good question. Simple to answer.
There are 3 kinds of startup money:
- Life Ring Money. You need it to save your startup. Often sought when everything goes bad but you are determined to continue. You cry "We just need a bit of time to prove we can turn this thing around!" Comes in $100,000 amounts, sometimes several rounds in a row. Not a sign of strength. Company is desperate.
- Pillow Money. You put it in the bank to sleep better. Used in case of the rainy day (which will come, that is for certain in startups). Classic round for startups that are growing and successfully on the path to IPO. These are multi-million dollar rounds from mid term investors. The startup is very close to or already at profitability and positive cash flow.
- War Money. This is for declaring to the world your intention to enter the contest to climb the new mountain to become the gorilla of a new category. Serious money. In the millions. Will take several rounds to know if you have achieved your ambitions. From seed rounds to later stage hyper growth rounds. Aggressive investors with deep pockets are needed.
BOTTOM LINE: Decide on what kind of money you will raise. That will focus you on the precise type of investor you will need. If you need survival money, rethink your plan. Some of the companies I have watched have switched from being careful to being aggressive and have altered their business pland and thereby moved from life ring money raising to completing successful war money rounds. A well financed startup has a greater chance of executing on its plan. That wisdom contributes a vital ingredient to building your unfair competitive advantage.