Newbie founders Raising Startup Pre Seed without giving away your first Child (equity)
Our journey as a so called startup has been intense (Well who’s isn’t), well honestly ours has been 5 or so years, definitely not a overnighter. Most people ask wow, 5 years and you have no traction or beta launched? Well that’s the reality and more on this later, but for now we are where we are and we are a startup with an idea, a prototype and half of a beta (MVP) and we also have a bunch of eager subscribers and a whole lot of experience now. Maybe it’s our procrastination of launching, or maybe it has been the size of the idea we tried to start with and our time we took to bring it down to the ground to a beta to launch now.
This stage for any startup for most entrepreneurs/founders can be tough, the world is full of ideas and your great idea whether it be from an internal desire or seeing a market and making a product to fit it is challenging and to be honest nobody really cares about your idea unless you have a god damn good compelling story to back it. But could it be easier?. We asked ourselfs this question. See at this stage there is a lot of hustle as such and platforms to get feedback on your idea, vision and prototype is limited, see product hunt’s ship, and betalist are starting to build tools for this, though at the most difficult stage of a startup the tools are limited. Some take on the marketing and salesey approach, but in our experience it’s gold to have something working to show them, which requires some funds even if you have been bootstrapping your life away. At this stage currently it’s more up to you to take on the hustle & flow journey, going to events, talking to people, sharing in general what your up to. But we want to change that.
This is a great article to give you an idea of what not to do when hustlin.
Beware of Startup Prostitution — 10 warning signs for startup founders
https://byrslf.co/beware-of-startup-prostitution-822713ae305f
But one thing was certain, the ecosystem to raise and gain support at this stage is like a wild wild west gun fight or serious scouting issues for food for your newly born at home in the T pee. The funding is there for this “pre seed” stage, though equity is usually handed over to those that give you access to investors. Though we did not align with this, even though we may open up to this in the near future we didn’t want to start out our journey like this. See for us it did not seem right for either the investor or for us to hand equity over, for one reason it may not even be viable to have a legal structure or company setup, so how do you allocate equity for an idea stage startup (Even though we feel we are more then this). See it would not be in our best interests to allocate equity when we did not know the true value of this platform we are building and it would not be right for the investors/supporters to take on equity when there is no traction on our side from users. We needed a different model.
We also explored how best we could present ourselfs as business to investors, including going down the route of a typical canva business model/plan and how the startups really do this. Here are some good articles on this if your talking to non tech/non startup related investors.
A Lean Alternative to a Business Plan
Ignore the Business model Canvas when starting a Startup
Don’t use Ad’s to get your first customers
What we had to rely on is our team and their story, our vision and our prototype and some pretty serious inspiration on our excitement for this. See we needed a new model, a model where we could raise a little funding to get things flowing, to pay the bills of building this, and the basics, food, water, shelter at first, so we create something never seen before (Well we as naive founders may think, but you gotta be optimistic right!).
See we have an advantage, we live in a third world country and our investors/supporters are mostly from 1st world so the economics of it are ideal, cost of living is low and we can make shit happen more easily, even with families. We also, during our 7 year journey learnt a lot, for example we started thinking we needed to hire a top dev from Koder, which was going to be nearly 100K, this all turned when we decide we could piece this together more effectively with 3rd party tools and learning a little Javascript. So we did and we now are only needing 60K for year to make it happen. And that means to launch to our subscribers and get traction.
So what’s our model.
We like to call it, “Pre Seed Crowdfunding” (non equity, non reward) giving investors/supporters a reward as a share in our future profits, maybe a profit share” model, though this term is usually associated with allocating new employees/founders/team or maybe seen as shares to a company. Not only this we took inspiration from Patreon’s type of model and allow investors to mitigate their risk in us by making the lump some investment split up into monthly amounts, with an option to pull out if they did not see any movement in us. This allowed us to get working and focus 100% on building and launching the platform, and return an ROI to those that supported us.
So from what we have learnt we are building for ourselfs the framework (including payment systems, interface and behind the scenes tools to enable us to manage a crowdfunding campaign of this sort), what is to come is developing the legal structure before we share this with any other startups in our platforms ecosystem, but that will come.
If your curious, we have started to formulate it, think of this as a crowdfunding page for startup founders looking to raise a little funding from friends, family and close investors to get started building and iterating with one key feature, no equity given and no physical rewards as we are a Tech/Saas platform.
Another thing that is really important to us is to take the lean startup methodology when building, and also create the user feedback product development system, this meaning we need a system that allows users to contribute and share what they want from the platform in a community type setting and also what was important is somewhere where we can capture those that are hacking your product, that are taking the product to places where you could monetize and there is value for them, usually found on github.
Check it out, and how we are doing it and please let us know about your journey with funding at this stage. — www.discovereel.com
Maybe just maybe we could build out something with your help, so feel free to join our conversation about this topic here. — https://discord.gg/RdWBJHN
Ok guys, we’ve got this.
Dean & the DR team.
