I have been funding my MVP from my own salary, but lately have been toying with the idea of raising more money (nothing crazy, maybe $100K-$200K) from external investors to get to scale faster. The idea is that I would get some traction/customers with the MVP, then look for investors to expand and grow. But I wonder if I even have a chance given that I'm not willing to quit my day job at this point in time. Thoughts?
Andy, according to who? Have you ever approached investors other than your friends and family? I have approached dozens in the past when I needed them. Not once did I have any form of investor, be they institutional or private ever ask about my other ventures or projects. Granted that may not be other's experience. Additionally, many entrepreneurs have several ventures they are involved with building at the same time.
That is why an entrepreneur should present timelines. And again, if the investor signs off on those timelines, as long as the entrepreneur meets them successfully, that is all that matters. Unless of course there is some legal conflict of interest with other ventures or employment.
As much as I hate to say - it depends.
Investors will want you and your team to get "optimum" results from the cash they invest. Time is a risk factor. The longer it takes to achieve key milestones the greater the risk. So if you working full time will cause delays in meeting those milestones, then they will not be in support of you continuing to work full time.
On the other hand, if you leaving your job would place an undue strain on the cash flow without commensurate results, then they would likely want to to stay employed.
I think the key is to think it through and develop a plan.
I was invited by a friend to attend an investors meeting as his second eyes and ears. The 4 founders made an excellent presentation and you could sense that the audience (about 15 prospective investors) was interested. During the Q&A, someone asked the question -"At what point, will you all be coming into the company on a full time basis?". From the reactions and responses, it was obvious that:
1 None of the founders intended to quit their other jobs
2. They had never discussed it.
You could see and feel the energy leave the room. Interest died. No one invested.
Hope this helps. If you want to discuss your specific situation, feel free to contact me directly
It depends on what the industry you’re in. Some industries require full time attention while others do not. It sounds like this is SaaS so the general answer would be most investors want you to keep your stable, bill paying day job at least until the revenue from the venture can pay you enough to move to full time. I hope that helps and best of luck on the venture.
My original point exactly. The founders had not thought through it and developed their plan (answer). BTW, they were not not my friend, he was one of the possible investors in the audience.
I don't think there is one answer that fits all situations. I also don't think it should be a "we'll deal with that later" type of thing. Think it through. Make it part of your plan according to your specific situation. Get input and feedback from your advisors/ mentors. If the potential investor doesn't or won't accept your plan- then they probably aren't a real good candidate for investing.
Nothing is impossible when it comes to investors, but yes, being a part-time founder does decrease your chances significantly. That being said, it sounds like you may have other, perhaps even greater handicaps than having another job, like being a lone founder or having little to no traction, or outsourcing product development - all these are bad signs for an investor.
Set your milestones and deliverables. Nothing else matters, and quite honestly it is not the investors business beyond this. The investors are not going to care what you do with your time as long as you do what is necessary to reach the set upon goals that deliver success and profitability. Hence why smart investors invest in tranches, rather than one lump sum.
This is such a good question! I think this is something that we are all going to end up asking ourselves as entrepreneurs. When should I quit my day job and go all in. I guess you gotta ask how quick can you get that funding, and how much do you have saved up? If you have enough savings to live for 3-4 months maybe just go for it. You can't devote all your attention to this project with your foot half in half out. Your day job is important, but also think what is best for you 10-20 years down the road. Will this project help stabilize your financial future or is your day job going to give you that? Even if the project you have now fails, will that leave you with enough money to make a new project and keep going as a entrepreneur? I don't think there is much you can do but ask your self a lot of questions and then make a big decision and see it through. Very exciting! Best of luck.
Robert, the bigger problem is that your friends didn't have an answer. Also, I would question the quality of investors if it was some kind of cattle call pitch. One correct answer when they asked about quitting and going full time would have been, "Entrepreneurship is a full time job. We have presented you with a business plan that is competent, and milestones we plan to achieve on time and with success that will lead to profitability. That is what matters." And if the investor did not respect that answer, then its the wrong investor in my opinion.
Asking about full time status opens a can of worms for personal information that is none of the investor's business. Example...two entrepreneurs with startups. Entrepreneur A and B. A tells the investor "I quit my full time job to build this company" Entrepreneur B tells the investor "I am not quitting my full time job at this point." Now what is the problem with both answers? Neither address performance or goals. Neither in itself is a measure of whether the investment will be a success.
Reality-Entrepreneur A has a sick family who he cares for and it takes much of his time. He also has 4 children he takes to school and soccer practice. And he is also a great cook, so he cooks all of the family’s dinner. And, his wife who he married for her looks, not personality is draining the family bank account that in 3 months time will lead him to have to seek full time employment again. By the end of the day, while he has more hours, he is so worn out that he approaches the start up with less intensity. Entrepreneur B on the other hand, doesn't quit his full time job. He is single and waiting to meet a frugal woman who he knows won’t blow his fortune once his startup is a success. And when he gets home at 6, he hits his start up hard until 1 AM. If an investor asks these types of questions, one…it gets into personal details that are by nature personal and none of their business and also legally issues. More importantly, two, it does not evaluate whether or not someone will have success.
You could create a combination of a thousand examples where quitting a full time has little if nothing to do with the success of the startup/investment.
Many entrepreneurs who achieve success did so because they were driven to quit their job with the boss that they hated.
Focus on goals, deliverables, and deliver. Any competent investor will say "What you do with your time is not my business as long as you deliver what I am investing in and expect you to deliver." So if you find an investor who is more concerned with your full time job, use a scenario such as the above. If they get offended, they are the wrong investor. If they realize how ill focused their question was and see you mean business…partner with them.
I've worked with a number of angels, angel groups, and VCs in Silicon Valley. (I've never tried to get investment from my friends and family. I have no idea how other people's friends and family will respond.)
They are very focused on speed. The nice way that they express it is "if you have time to do two things, you have time to do one thing twice as fast".
There are ventures, such as construction and agriculture, where this isn't true.
Angel investors write checks out of their own pocket. There's an acceptable level of risk with most any startup. But if you lack a team dedicated to racing through the Valley of Death toward breakeven before your burn rate runs out the runway provided by the investment, and you are also diverted with duties to your full-time job, the risks are compounded for the investor. No one can definitively state that no investor will accept these risks, but you should be cognizant that your part-time involvement elevates the risk for the investor. And in equity investing, investors don't benefit until there's a liquidity event of some kind (i.e. VCs buy-out angels, M&A or IPO). Getting to a liquidity event is key for the investor, not just whether the company reaches market validation or break-even or profitability. Those are all necessary milestones in the journey. But the investor is seeking returns which do not occur until there's a buyout of some kind. If you can successfully reach the point of liquidity while working a full-time job, and can convince an investor that you can do that, then perhaps it is possible. But the odds are stacked against you under these circumstances.