different investors for different products under one startup
We are a startup building 3 social media apps. We have managed to attract two investors to two of our apps. The problem is we were pitching it to them as stand alone products and not under one company. Any tips on whats best to do?
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It's hard to tell if your investors knew that you were building other products. Could you clarify? – Michael Trafton 15 years ago
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hi! it was actually not intentional, our 1st web app was the only one planned but I kept hitting this wall with inbound marketing and social media marketing even before starting this company (we were indie game developers). and thats where this 2nd web app was borne out of. its a solution to a recurring problem. so the 1st one is ready to launch next month but its a nice-to-have. this 2nd one is a real pain solver. the huge plus is both are social media based and can even share some codes (login, comment etc.). we are equal ly committed to both and are forming two teams to tackle it. – Eric 15 years ago
2 Answers
Typically, investors invest in companies, not in products. Most companies don't end up with the same idea they had when they got started, and smart investors know this. So even though you have attracted an investor with a specific app, that investor will expect a return on your other apps as well.
One problem that I see with your situation is if your investors think you are only developing the one app that they like. That an investor may feel like you are spreading yourself too thin trying to develop three apps at once. This is probably something best addressed soon, before it gets out of hand.
The bottom line is that your pitch should be for your company, not for a specific app.
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what if there are two separate teams handling the apps? has there been no precedence of an app spinning off of a company? didnt twitter spun off odeo. and i think i read about Carsonified spinning off a product. – Eric 15 years ago
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The important thing is to be upfront with your investors, and since you have two separate teams, I think you have a great likelihood of convincing each investor that the idea he invested in is getting good attention, so I'm not worried about that anymore. – Michael Trafton 15 years ago
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Spinning off one of the products into a separate company is fine, but if you have already received investment from both sources, it can get complicated. If you take IP that was developed with investor A's money and spin it off into a different company, investor A will expect equity in the other company as well. Alternatively, you can have the second company buy the IP from the first company - that would be fair. – Michael Trafton 15 years ago
Are the two investors interested in the same two apps? Or each one with different ones.
The Lovin' Spoonfuls song Did You Ever Have to Make Up Your Mind? comes to mind.
I would think that each investor believes that you will be 100% committed to their project, so I don't believe you will have a good reaction from them if they learn about your other efforts though another channel.
Do you really have the resources / bandwidth to launch three apps? They may all be good ideas, but bringing one app from concept to production is a challenge.
Pick the best one, get it going, and then leave the other two for another time (or for self funding at a later stage).
Or - If the products naturally go together, then sell your companies ability to launch, iterate & learn rather than the individual products.
