Advertising · Angel investing

Raising money for advertisement. Selling shares vs. getting a partner?

Alex Pantelo Software Engineer/Product Development Specialist

January 26th, 2016

We have a finished product LineBuzzer.com we need to raise money for advertisement.  None of existing cofounders having an advertising experience. What is the best solution, sell company shares (this is a startup) and hire an agency or find a partner with advertising skills and budget?

Bryan Fikes Chief Strategy Officer at zentiv

January 26th, 2016

Alex, as a seasoned internet marketer with over 16+yrs experience and a client roster that includes Fortune 500 companies, I can tell you my thoughts on your post.  I have a service company called Zenergy Works and we do top notch SEO and Web Design.  I also have my own business incubator and venture builder in Zenergy Ventures.  I first got approached from a client back in 2007 that wanted to give me equity in his company in exchange for my skill set.  We settled on a fair deal and so we begun.  I gave him what would now be equivalent to $100K+ in services in an 18 month period. Didn't receive any cash flow or compensation for my time and understood we were going for a big cash event.  Well...3 years later. Nothing.  Great SEO and Incredible Marketing never fixes a bad business owner or bad employees.  ----- Now, a newer scenario.  A friend reaches out and ask if I would be interested in joining him in developing a product and doing all the marketing.  Having learned from my mistakes, we decided on a 50/50 deal and we put equal cash into the transaction.  We split duties accordingly and within months had a success that is now cash flowing.  Everyone is happy and we are on track to be the best "Tactical Dad Diaper Bag" in the US.  (Google it!)   -----My point.  Equity is expensive if you can get by in the short term and start generating cash.  But...Hiring an expensive marketing firm and spending raised capital also has its pro's and con's.  If I was a Software Engineer and Product Specialist, I would look through my network on friends and find someone you can partner with who shares the passion for what you have.  NOTHING beats passion and skin in the game.

David Levine Software Development, Marketing & Analytics

January 26th, 2016

Have you considered looking for a mentor first? Someone you can grab a beer/coffee with to brainstorm?  I'd recommend that you create an output/input plan for how much you'll anticipate you'll return off of any investment you make.  There are certain fixed costs that are unavoidable (like if you're doing ppc you'll need a good landing page software) but how much you invest in your advertising is completely up to you.  Where do you live?  Are there any local ad agencies you could ask out on a mentor date?

Martin Omansky Independent Venture Capital & Private Equity Professional

January 26th, 2016

Sell shares. Do not borrow money. Partners are fickle and unpredictable. Use share sales to hire a good outside agency and use a part-time consultant to supervise the agency's work. Manage advertising budget carefully. Evaluate effectiveness of advertising bloodlessly. Study and use guerrilla marketing and social media. Don't be misled by early adopters. Look for repeat customers. Sent from my iPhone

Anonymous

January 28th, 2016

There is a third option.

Hire a digital marketing company that works on a percentage of your ad spending.You are going to spend money on advertising anyway.You do not need to borrow enough money to advertise over the next 12 months.

Advertising expense should pay for itself fairly quickly. It should generate more than what you spend.If you cannot make your ads pay for itself using your own money,Borrowed money is not going to change the trend.

That should be the criteria to look for a partner instead of raising money. I just went thru a three month long experiment and decided to hire a marketing company and fund the first few months myself. You need a team, that lives and breathes digital marketing all day long.

If you decide to take on a partner, he/she will probably just fund the advertising and drive the team. And that is ok, if you do not have the money to fund the first few months of advertising. It is not practical to expect one partner will be as effective as a full stack digital marketing team.

Start with a smaller monthly budget and increase it based on performance.If you are an entrepreneur that cannot sell, then you need a partner that can.

Alex Pantelo Software Engineer/Product Development Specialist

January 26th, 2016

 David,

We're an expanding start-up company based in New York City. We have a team of experienced developers who covers complete development and project management, the only one project puzzle piece is missing, advertisement.

We would like to raise money to get professional services or get a partner who has an experience and money to invest in exchange for equity. 

Bryan Fikes Chief Strategy Officer at zentiv

January 26th, 2016

Of course our Venture Capital guy would say don't use debt service to build your company, use other peoples monies.  Yes. Effective if you think the product is not going to work and you have no buying power.  I've built 18 companies over the last 3 years, some with investor money only, some with a bank money only, some with hybrid's of the aforementioned.  EQUITY IS EXPENSIVE if you think you have a break out product or service.  Bank Money is expensive if you have HUGE risk.  And yes, they take your house, car, boat, wedding rings..everything.    Bottom line.  Test your product in 3 major DMA's (Designated Market Areas First) with seed money only. Bootstrap and go with out to earn a reputation in the space.  If you go for money, do it later in the business model. You can grab more dollars for less equity.  FYI - Our Dimitrios may not understand QR Code technology, but yes. The market is not as warm to QR codes as it was in 2013.  You do have a learning curb of people downloading the app prior to entering the restaurant or bar. I would say that finding an affinity partner to CROSS sell products will be much easier.

Jivko Pentchov

January 26th, 2016

Hi Alex, Having a partner with money for advertising may not bring you a clients, it may bring you an issues. I would recommend with all of your co-founders and partner to explore the local market wherever you are. Knock on every door, give your service for FREE for a month. Let your clients do FREE advertising for you. The best way to grow is organic. If your product is good and clients see the value and profit, they will call you.

Bryan Fikes Chief Strategy Officer at zentiv

January 26th, 2016

So Jivko just recommended a combination of Demo Marketing, Affinity Marketing, Guerilla Marketing, and Direct Sales Channel growth.  Cool.  And sure those are viable.  They wont launch a program nationwide unless you have insane traction that is viral.  (The Unicorn of Products. Less than .001 of businesses will ever have that kind of early traction.)

Alex Pantelo Software Engineer/Product Development Specialist

January 27th, 2016

So, if we will raise money in either way, what would be the best way to spend 60k cap in advertising to rich out to broader audience in both B2B and B2C areas. Please keep in mind that LineBuzzer.com providing guest paging services which intend to replace pager system (like restaurant, etc.). So, we are not tie to a specific area or state.

Martin Omansky Independent Venture Capital & Private Equity Professional

January 27th, 2016

I can't comment fully unless I have a broader picture of your enterprise. I can say that in the absence of a large budget for advertising, a highly focused program with a likelihood of a good hit rate would have a better chance for success. I assume that this is not an original thought.