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Summary:

While working a full time job, I have devoted my nights and weekends to developing a community-powered marketplace, which I feel will be incredibly successful. I have bounced the idea off many people, and they seem to be excited about the site and the movement it […]

While working a full time job, I have devoted my nights and weekends to developing a community-powered marketplace, which I feel will be incredibly successful. I have bounced the idea off many people, and they seem to be excited about the site and the movement it can create. Now, however, I stand at a fork in the road. All I need now, is to get the word out to people. Since this is a consumer-oriented application, I feel going the standard Web 2.0 route and getting blogger attention and “going viral” will not work for this application, and will simply end up wasting away on a web host like so many sites do nowadays.

*Question of the Day:*

*Should I Go Big — and get venture financing to do it*? or Would it be better for me to *Build Small — by scraping together whatever funds I have to eke out some small print add?*

It seems the tech entrepreneurial world is torn right now, with half the crowd saying “get funding” and the other half saying “VC is evil, do it yourself.”

What are your honest thoughts on the matter?

  1. Personally the way I look at it is I could devote about as much time to running around trying to convince potential investors to relieve me of my business as it takes simply to knuckle down and focus on building the thing and attracting users. But as a developer and I’m more comfortable in front of a keyboard than a whiteboard anyway and development doesn’t actually cost me anything apart from time – so VC seems less important.

    I’m also tainted having seen several people lose their baby’s as a result of differing opinions with their investors and equal number of crooks pushing vaporware.

    What I really want is to find a business partner who enjoys selling as much as I enjoy building – this to me would be far more beneficial than a ton of VC cash.}

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  2. It’s hard to say without knowing a bit more about your product, but I’m concerned about a few things.

    “All I need to do is get the word out to people”. I see this a lot in startups… The sentiment that you have a great app that everyone would want to use if they knew about it.

    This is easy to test/optimize. Get a bit of blog coverage, do an adwords buy, post on a forum or two… Then measure your conversion (how many visitors visit your site? engage with your app?). If you can’t get those numbers to look good, throwing marketing dollars at it is just going to add a multiplier to a bad formula.

    Whatever you decide, make sure marketing works on a small scale before you tackle it on a larger scale.

    In terms of funding, I’d suggest nailing the above formula first. i.e. Make sure you’ve found a way to invest $1000 in sales and marketing and make something MORE than $1000 in revenue as a result (hopefully with a bit of a feedback loop… some virality/word-of-mouth is necessary). If you can do this, investors will be a lot more eager to invest and you’ll get a much friendlier valuation.

    Of course, there might be small-scale issues… Testing at a small scale might cost more per-visitor, be less automatable, etc. But it’s the only way to know if you have a business on your hands (or an expensive hobby).}

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  3. Hi Zvi,
    I’ve actually been faced with that question myself one times too many and from my own personal experience I would definitely suggest keeping it small AND PROFITABLE first.

    Borrowing this quote from Mr.Wil (who has incidentally has written an excellent book called “Go Big or Go Home” which i read recently – and a recommended reading all the same) your business is just an idea until people start buying into it. So before you start approaching investors its good to generate some income and use that income to market the product first.

    Good luck and HTH,
    San.}

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  4. I think the bigger question is how do you plan to reach your target audience? If it isn’t via bloggers, etc, where are they? Online? Off? Taking out an ad with either your own money or vc money may be entirely a waste of money at this stage of the game. You can still go viral, but you need to reach out to your actual customer base, wherever they are, and get *them* excited and engaged in your marketplace. Maybe get some folks beta testing and give them some invites for their friends so you can control the influx when they reach out to like-minded souls.

    Good luck!}

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  5. There are two times to raise financing, either when you’ve got powerpoint, or when you’ve launched and you need money for more servers and to take on staff.

    Trying to raise money when you’ve launched, but when your site isn’t getting much traction isn’t going to be easy.

    Additionally raising funding won’t get you traffic, so you’ll still need to find your way of generate traffic and usage to your site. There are plenty of books and blogs you can read to learn about this, and not all of the techniques will cost you an arm and a leg.}

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  6. I think this comes down to your own objectives.

    1. What are your objectives?
    2. Whats your exit plan? are you wanting a hasty exit? or happy to stick for the long term.
    3. VC’s are going to want an exit strategy in place so they can get their ROI are you prepared to give up a big stake of your company in order to see your vision thrive?

    I personally favour the grow small at first. Once you get to a tipping point where you need cash to grow…then go VC. Bringing in Venture Capital too early may cause more problems and comprimises to your vision.}

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