In seed funding, can the investment come from multiple sources?
I have two investors that appear interested in my concept. I am going to speak to one tomorrow. I intend to disclose to him that I will also be speaking with another investor very soon. If possible I would like to procure funding from both sources. Will this put him off or will this attract him more? Is it easy (enough) to work out terms so that I can get funding from both sources? Also, is procuring funding from multiple sources a good idea or can it lead to problems later?
Funding Investment Investors Seed Funding
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It's done all the time. Be clear with him about the reason you are telling him about the other investor. I'd advise against using it as a tactic to pressure him, or allowing any perception of that. – Tim J 14 years ago
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@Tim - That's good advice. How can I make *sure* not to come across as pressuring? The other investor is a family member... maybe it help to say that. – John Berryman 14 years ago
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Just be honest about it. – Tim J 14 years ago
1 Answer
Yup, its actually a very wise strategy for multiple reasons:
- You are not putting all your investment eggs in one basket, if one investor pulls the plug there are more to fill the gap
- Makes your investors more comfortable knowing they are not putting their cash behind a prospect they only beleive in.
- It lets your realize that investors are like crabs, and there are a lot of crabs in the sea. I would use the term fish, but fish actually beatiful and not bottom feeders. Learn to respect those that invest in your ideas, be greatful, but know most are only investing because their is something in it for them.
- It forces you to structure your business where you are accountable to more than one investor therefore you keep legit records, hold proper meetings, and hold yourself and employees to a high standard.
Tell your investor that you are excited to have his support, ask them what they think would be a reasonable amount they could contribute after letting them know how much you need to raise. Let them know you are looking at different sources as a strategy to lessen risk for all investors. A smart investor will not get his feelings hurt, if they do, then you are dealing with someone that wants some sort of advantage over you. When i have my investor hat on, I only get greedy when I find a weak business where I can overtake. In situations where there is a business that I believe in, I usually share the opportunity with other friends in the same financial situation and we go in as a team. A few of my good friends have been those that invested on products, and that I have met through our mutual investments.
Best of luck.
BTW if raising capital fails, keep building and moving forward. Capital is only the fuel you need to run your engine. There are lots opportunities to fuel up, key thing is to have that engine assembled.
