Just went live and need funding- what do I need to prove?
I just launched an online platform that allows inidividuals to video chat based on their interests. Unfortunately, Sean Parker launched a similar concept last week but it just means we are both on the same page.
Since the site is now live (in beta) I need funds to really drive traffic and build the environment so we can take the next steps.
I am looking for some guidance on what steps I need to take to gain an investors attention. What do I need to prove and how can I get them involved from the beginning so I can continue to drive engagement?
Funding Investors Product Launch Fundraising
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Hi Kumar, welcome to the site! Your question is a bit broad. Have you already searched our site for relevant threads? The [venture-capital tag](http://answers.onstartups.com/questions/tagged/venture-capital) and [angel tag](http://answers.onstartups.com/questions/tagged/angel) may be of particular interest to you. – Zuly Gonzalez 12 years ago
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Why wouldn't you list your site on your profile? You could be getting free traffic. – Jeff O 12 years ago
2 Answers
Since the site is now live (in beta) I need funds to really drive traffic and build the environment so we can take the next steps.Actually you have it backwards - one of the key metrics that investors use before making a funding decision is traction - the number of users you currently have, the number of people who use the site daily and other metrics related specifically to your site - like the number of video chats, the number of chats per user.
Without traction you are raising money based solely on your reputation and track record. And if this is your first raise you don't have a reputation to bank on. Sean Parker and Sean Fanning can raise a ridiculous amount of funding because they have a long and storied history.
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Completely agree with you on having traction before funding and I guess I should have seen that coming. So then I will have to find extremely cost efficient methods of building traction. Of course funds can be tight at a time like this so if you know impactful ways to drive traffic it would be great. Already working on SEO, blogs, social media. I am just having a bit of trouble understanding how to drive traffic without real marketing dollars. – Kumar 12 years ago
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@Kumar - let's assume you had $10k or $100k as budget for marketing. Where all would you spend it? Can you get it for less 'now' by pulling out some contacts or networking? Can you make do? Don't let physical presence of $$ be a barrier. More so a good marketing budget doesn't imply a good conversion rate and may be too low to drive traffic...look at other distribution channels - social networks, google adwords, social media marketing companies that charge $200/mth and so on...go cheap and see the conversion rate before asking for marketing dollars :) Best of luck – Ph D 12 years ago
Investors tend to invest in a business. Users are great. Traction is great. A business is better.
In a very small cross section of opportunities, for a very select and well connected few, and/or those with a lot of luck of being in the right market at the right time there is a possibility of securing investors purly to aggregate user with the hope of monitize them later. You might be able to make it all the way to IPO before the faceplant -- but who cares then? Well, if your goal is to build a business, not just spend prospective investors money and earn stock options -- then you should.
Build a business. And then go find investors who want to invest in the business. There are lots of video chat sites. Video chat is not new. It isn't trailblazing technology. So what is your business? Who are your customers? What will you charge them? How do you know they will pay? What is the cost of delivering the service?
Prove it.
Then prove that you can scale it.
Now it is time for investors.
Perhaps now you need friends and family (or a good credit card with some room) -- people who believe in you and want to support you. they don't really need to see the business yet, they know you will get around to that.
But get around to it before you go to investors. They want to invest in a business.
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This is a great answer. Sadly I don't think it's the way people go about startups these days, and even sadder they probably don't need to a lot of the time. Build a business is the best advice people can get on this site though. – Joel Friedlaender 12 years ago
