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I have a killer Facebook app that is being built right now (will be finished by the end of May) and I’m looking for investors to come in after I have proved my numbers and dump gas on my fire, to capitalize on my first mover advantage. And I’m coming before you all today to ask you how something like this is ‘done’ (what is the financial instrument of choice?)

Here is my issue: the app uses many bleeding edge API's, which makes it very hot from a tech standpoint, since it is at the center of social, mobile, local and payment. These API's not only made the idea possible, but it made the idea extremely cheap to build... and unfortunately, by the same token, there is no way to protect the idea. And within 6 months there will be others in this space, plus the usual copy-catters.

But I believe, however, we have a killer app. And the way I intertwined it with Facebook, it will be very viral, especially initially. And it will make a pile of money for a least a year, maybe longer. The key, though, is disseminating it quickly to take advantage of being the first mover in this space. And I think I have a low cost 'CPA' strategy to make ALL our money back in a cycle, which may last only a week, with an upper limit that ramps up, and tops out, at around $500k per DAY in terms of an investment opportunity.

So what I'm looking for is an investor that is marketing/tech savvy enough to really see the brilliance, but one ethical enough not to flat out steal the idea from us. Right now I have $10k in it and a fair amount of time. Then I have another $5k set aside to launch it to show my numbers. Prior to launching at the end of May (hopefully at TechCrunch) I'll spend ~$500 to$1k on beta marketing... basically testing my new CPA model, as well as the technology.

Which means, once I prove this out in beta, and get hard numbers to back up what looks to be the case, I'm looking for investors to throw down some big money. In return they will get most of the profit, but I’ll end up with a free user who touches several more for free. I’m looking to storm the market in less than 6 weeks, which is faster than just about any competitor could reasonably respond, even if they were hyper-agile.

The key to this type of strategy is just bum rushing the market before anyone even knew there was one, and by the time they know what’s going on, you already picked all the low hanging fruit and they are forced to exert effort to get what’s left …or buy you out.

One idea is just do it as a quick cycle, recurring cash loan, which yields cash back…. you give me $X, I give you $X+$Y back in a week, then you decide if you want to roll all (or a portion) back over, etc. Another option we are set up for is selling Preferred Stock of our NV C corp. Another option is that Ron Conway Convertible note thing that is all the rage these days.

Honestly, since this thing is so scalable, and I’m looking for complete domination of this market, I was thinking about tying returns directly to PayPal, so that if you wanted to invest, you could transfer money to your PayPal account and then we would just use money out of that account as needed, so instead of sending me a wire, etc. everything is just done automatically, so I could collect money from essentially an unlimited amount of accounts to spend on the CPA efforts, and it would all end back up in the investors micropayments account, in real-time, without me ever actually managing anything.

Unfortunately, that last paragraph won’t really make too much sense unless you know what we are really doing, but hopefully you get the point. I honestly haven't looked to hard at the financial instruments.... what I need, in a few months, is access to a lot cash and some folks that can watch the whole thing unfold, so they are confident everything is in order, so when the day comes to really push, there will be no hesitation, and they will throw down big cash.

Personally, I see this as almost no risk on the investors' part, as I don't see any scenario where they can lose money. They only put money in after everything is tested, JUST on CPA... and get it back, with big interest, within a week, to do again if they want, if we go the loan route. And they throttle the amount and shut off at any time. By the same token, the very biggest impact will be at the beginning of the launch, the same way Adsense made a lot of money at first because people weren't desensitized yet. And like I said, within a month after we launch there is a potential to invest several hundred thousand a day, if we wanted to.

So, given we are in a unique situation... in that what was not possible to do 6 months ago, for a bunch of reasons, is now possible thanks to combining several APIs, which did an enormous amount of heavy listing… and that as a Web Strategist/SEO/Social Marketer, with 15 years of self funded entrepreneurial experience, I’ve put myself in a position to capitalize on everything… how do I actually go about pitching this to investors?

My idea was a cash loan with basically no collateral. If I could pitch that concept to a few players: they can wait until the last second to decide, then sample what happens for real, then pour money into it as soon as they were convinced… in return for up to 100% of the cash back plus 100% of the profit…I thought they might actually bite, if they came in now, and had full transparency all along the way, so they were really comfortable.

And if I got a few signed on like that, then I would think there would be a few more that might be interested in the Preferred Stock, or the convertible note, to invest in a few more of my related and symbiotic ideas that will add even more revenue streams into the mix. The big idea marketing-wise is to: pull SE traffic from the web, FB traffic from the app, and then iPhone and Android store traffic, using SEO to ensure traction for the two most obvious verticals in the space. And I think I might need another $75k there, so we are realistically still in the Angel realm at this point.

Then, once we got traction, users, we go for a proper round of funding and I go for my V2 push, which ties everything together.

What do you think? Asking at the last second wont work, and if I ask now, I’m still not sure what I want, or what is ‘common’ in the industry. My ideas usually just work, so I fund myself. This one, though, deserves something more than a bootstrapper can offer…

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3  
Is this a question or a pitch? – Landon Swan Mar 31 '11 at 5:14
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"Dump gas on my fire" sounds meaningless outside the US where gas doesn't mean petrol. Not using country specific slang is always a good idea. – David Mar 31 '11 at 8:32
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Hi Landon, it was a question. I have an app that is going to print money until a bigger company steals it. My goal is acquire 1M users or so in 6 weeks at no cost to me. They will cost $2.50 a piece and within 7 days I can give you money back, with interest.... in your opinion, should I ask for personal loans? Convertible notes? Set up a crazy affiliate program where you just deposit your money in a PayPal account and I grow it for you? What? – user9077 Mar 31 '11 at 13:01
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David, good advice and I hear you... but for the record, imo, 'dump gas on my fire' is not really slang. It is a metaphor. If it were slang, these words could not be found in the dictionary:) – user9077 Mar 31 '11 at 13:09
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Cool, as long as you don't need anyone to light your fire ^^ – David Mar 31 '11 at 13:45
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7 Answers

up vote 4 down vote

Don't worry about anything. Prove your model. If it works anywhere close to what you describe here, investors will find you within a week. Think Chatroulette.

More likely, it doesn't work as well, you'll have to iterate, tweak a few things here and there, and pitch angel investors until one believes you can pull it off.

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up vote 3 down vote

Just wanna say that I am having fun reading these posts. As for advice, I don't really have much to offer because I don't know what the app does. It definitely sounds too good to be true. Mr Estocada I wish you good luck, but in this environment, specially after the 2008-2009 crisis, and recent talks about how overvalued tech companies like Facebook are, your main enemy is skeptcism.

You wanna be enthusiastic and optimistic, but at the same time, I think in the long run it is always better to downplay A BIT the potential of your project. This is like engineering a plane: engineers know that the full capacity of the plane is, say, 1000 tons, but they never say that for security reasons. They will tell you 800 tons, just to be sure that the plane doesn't crash. It is the same about expectations.

Good luck.

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up vote 2 down vote

Here's the deal from my opinion:

Investors aren't as risky as you need them to be. And neither are banks with traditional loans.

I love your enthusiasm, but what I read in your topic is blind optimism that is unproven. I really hope it works for you, but it also seems like you are 100% sure that it will; and you can never be 100% sure of anything.

On the investor side:

Were I an investor, I would see this as a "too good to be true" opportunity. No risk? Get my money back in a week? That doesn't happen ... remember, investors make their money on taking risk. The greater the risk = the greater the (potential) return.

It's hard for me to be more specific without knowing exactly what you are doing. You remind me a bit of my father, a stubborn German guy - and you probably need a little but of stubborness to succeed when others doubt you, as I'm sure many here are doing - but you also need to balance that out with being able to see the big picture and recognize a business without risk does not exist.

One the bank side:

You state, My idea was a cash loan with basically no collateral.. Simply not going to happen. No equity stake and no collateral? No bank or traditional lender will ever, ever go for that.

What now?

I know you think this idea will fly out quickly once you create it and competitors will pop up anywhere. that's going to happen anyway. the only way to get money is to prove to someone you have a viable idea, and I don't know how you make that happen without having someone actually using your product or service.

Remember the idea is only step #1. The execution is where the rubber hits the road. I have 1000 ideas a day but I need to dismiss them to focus on the 1 I selected to pursue.

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Go Nick! I have a 1000 ideas a day -- thankfully the people around me facilitate the process through which they are filtered to the ones that have a likely chance of succeeding! :) – Joseph Barisonzi Mar 31 '11 at 22:08
up vote 2 down vote

My worry here, regardless of what you believe it will do, is the complete certainty of your pitch. Sure an investor wants to see a reasonable chance of a return on his money in a reasonable time frame, but this is more "magic money machine".

Maybe there is a wrinkle in facebook that will allow you to exploit something to make a remarkable return, maybe your proofs will validate that too.

But as you're seeing here if you couch it too much in certainty you're going to get scepticism in return. What are the risks to your model / idea - there must be some aside from other competitors piling in. What assumptions have you made that you could perhaps have got wrong?

The old cliché "If it's too good to be true it normally is" holds here - so, I think you have to present it in much more traditional terms, or you're likely to create impressions of someone selling magic beans.

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up vote 2 down vote

Your post is too long to read but you can either get a loan (via a promissory note)- either secured or unsecured (with a much higher interest rate) or issue common or preferred stock.

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up vote 1 down vote

AngelList.com is the #1 site for VC's. That being said, I'd urge you to refine your pitch and understand how they work.

I hope you don't mind me saying that it does not seem that you currently speak their language or understand what gets them interested.

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1  
Come on, that's a patronizing comment, please edit it. – David Mar 31 '11 at 8:38
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heheheh, no, it's ok, David... – user9077 Mar 31 '11 at 13:10
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Thanks for the link:) To be honest, it's funny now that I read all these comments people think I'm trying to sell you all something, and refer to what I wrote as a 'pitch', as you did. If this were really a pitch to an investor, I would have said something like, "I have this app that basically prints money. If you put $2.50 in it and wait 7 days, you get your money back + X. I have numbers to prove it. How much money do you want to put in this week?" And then whether they wanted shares in the company, or they just wanted to 'pour petrol on the fire', I would think they would be interested. – user9077 Mar 31 '11 at 13:33
@Mr. Estocada The reason people got things confused is because your pitch did sound a bit like a sales-pitch instead of an investor-pitch. That was what prompted me to suggest that you look into how to speak more of an investor-language. It is a bit too agressive in its current state. Just put into simple language what the problem is, how you will solve it, and why this is a big opportunity, and why you are -the- guy to do it :) – Genadinik Mar 31 '11 at 17:37
up vote 0 down vote

I don't want to get lost in the value or not-- but another instrument you could consider is receiving a short term note from an individual's self-directed retirement account.

The individual would make a loan from their self-directed IRA (or 401k, HSA) and the resulting payments would be back into their account.

There are many individuals with orphaned IRA's that have rolled these into self-directed accounts -- providing themselves check book control over a retirement asset. From that they can make the higher risk investment they would like to balance their overall retirement strategy.

Might be a good option for your money-making machine.

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