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it's my first post here so be gentle :)

First, I've read a few similar posts to the one I'm writing but I wasn't able to find an answer that fit the same mold.

Project Details: I have been involved in a popular open source solution for about 4 years now and have made great progress with building revenue from custom projects and from solutions my team and I have developed that's purchased and added to this open source solution. Overall, we're well into the 6-figure range for revenues so far over the past couple of years.

We also have a massive percentage ROI from each of the "products" we build that's used for this open source technology. In all cases of the products we build the ROI percentage is always growing because we build the product once and then sell it. We have to support and release updated versions, but 90% of the cost is in the design and development phases.

My Conundrum: I'm an Internet / SEO guy and, rather than taking my normal role of actively marketing and building our community and products (because I also run another SEO business), I've been almost solely responsible the project management, customer support, and everything else for this open source-based business. I need to take back the role of marketing and not being the czar of everything, so to speak.

What I'm Hoping to Find: I'd like to seek an opportunity to work with an investor that understands open source communities and products (GPL'd licensing, etc) first and foremost. I'd also like someone who would be willing to invest and lead our direction in growing our base of products and overall business based on our positive numbers and business model. I'd like to step back into my role of SEO and marketer and leave more of the business management aspects to someone who has more experience than myself. So, this would be a partner and investor situation.

So, I'd love to hear some ideas of where I should look, what type of investors/partners I should stay away from or try to find, or any helpful experiences so I'm on the right track.

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1 Answer

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thanks for posting.

I think the first thing everyone will say is "why do you need funding?" If you already have some customer traction, then is there any reason why one would expect funding would accelerate that rate of adoption?

Second - I'm not so sure that an investor will "to invest and lead our direction in growing our base of products and overall business based on our positive numbers and business model."

Some will if they are angels, others will with disastrous results. You (and your team) should control and decide what products should be out there based on customer development feedback. Sure, an investor can give you insight, but your paying (and non paying) customers can give more - a path forward to a sustainable business model.

[added in some more based on comment]

Here's a good article entitled "is your VC founder friendly?" - a couple of good questions to ask potential investors can be found here.

I'd also focus on a pitch / deck presentation highlighting what lessons you learned from your interactions with customers - and underscore why you need funding. Another good example can be found here

Finally, I would revisit the "investor / leader" model again and consider bringing in another sr. person to help round out your management team. You could leave it up to the VC's to suggest a sr. player - but there are times where you may feel that his / her interests may be more aligned towards the VC's view.

Good luck in your endeavor.

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Hi Jim, I appreciate the quick reply. I'm looking for funding to churn out more products based on our sales thus far. We are also in a market that's getting more crowded. So, funding would help us capture more market share before competitors. Being first to market is a big key component here IMO. I would also look for someone who can be a partner with a vision that's in sync with mine. I'm sure that's quite like finding a needle in a hay stack :-\ Mainly I'm looking to shore up more of my time to marketing, where I'm stronger suited. Thanks again for your advice! – William B Jun 17 '10 at 20:48
Care to share with us the name of your open source project? – jimg Jun 18 '10 at 0:44
Again, nice feedback Jim! I'll definitely be looking at those couple of additional VC resources this weekend. I think you have some great points that will help me come to more clear direction to take this business. Best! – William B Jun 18 '10 at 13:51
+1 on "why do you need funding." I completely disagree that funding automatically gets you market share. In fact if I were investing I'd be concerned that a company with 6-figure revenue can't fund it! I think what you need is someone willing to work for future revenues, not eating your cash in the meantime. – Jason Jun 20 '10 at 14:43
Hi Jason, Thanks for your feedback. The main reason we are looking for funding is because a) the types of products/solutions we are moving into are about 4 to 5 times more expensive to build, manage, and maintain, and b) revenues earned now are being used for programmer's salaries and expenses. I'm also budgeting into funding totals several more programmers, marketing expenses, and other expenses for kicking this endeavor up a few notches. – William B Jun 21 '10 at 18:36

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