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How will I know when my company is ready to receive an investment?

I am starting a company and have bootstrapped it so far. I have produced four versions of the demo. The first fully-working version is underway. Getting this to a beta phase product will require capital, which requires an investment, which requires an investor, which requires I stop working on the product and go out and talk to people about it.

The last time I raised money from investors, it took a while but I was successful. I don't want it to take a while. I want it to be brain dead simple for an investor to understand the value so that I can optimize the time I spend with the product.

What is the best way to approach raising money, while limiting both my time and risk?

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migrated from programmers.stackexchange.com Nov 28 '12 at 15:52

This question came from our site for professional programmers interested in conceptual questions about software development.

    
Reminds me of the bubble gum balls raining down in "Bedtime Stories" with Adam Sandler. On a more serious note, how dead-simple-brilliant is your product? Will it speak for itself? I think this is a lot of the reason that people have partners -- eg. a money/marketing guy and a tech/product guy. But that comes hazards as well, and if he is not already involved, it would likely be easier to find a good investor than a good partner. Any chance of finishing the product to a point of paying customers, then getting an investor? Cash flow is king. –  gahooa Nov 28 '12 at 1:05
    
@gahooa What is the litmus test for a brain dead simple product, other than "would my own mom understand it?" –  gunshor Nov 28 '12 at 1:19
    
@gunshor: The best test I know is that you begin to explain the benefit to the end user, and they so quickly recognize that it solves one of their problems that they stop you and say, "How much and when?" The more you have to "explain" it, the farther away you are from "brain dead simple". Seriously. Take advantage of this, because it's $5 million of not OPM speaking. –  Peter Rowell Nov 28 '12 at 1:32
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@Peter Rowell: I thought the expression was "shut up and take my money". ;-) –  Gilbert Le Blanc Nov 28 '12 at 14:00
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2 Answers 2

Any approach needs significant input and both business planning and salesmanship. If you can't be bothered with putting in the time to put together a business plan and sell your idea to an investor, no investor would be bothered with your business, as you obviously won't be bothered putting in the time to sell the product, and the investment will more than likely fail.

Behind most successful technology businesses is a successful businessman, and behind every failed technology businesses is failed businessmen. The tech has little to with success, and believe me, investors don't really give a rats about the tech. What they care about is a business plan and ROI.

Crowd funding..... sites such as kickstarter.com may work better for you.

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The best way that I have found through experience in funding others is to simply state the value of your idea. Explain whether your concept is a "nice to have" or "need to have." Most individuals when pursuing funds like to talk about their idea and the technology around it rather than the business itself.

Remember that the tech and product are probably really cool, but can easily be delved into later down the road. What investors need to know is whether there is a strong enough team to accomplish the mission, if there is a large competitor base and if there is a potential for follow-on capital.

That being said, you mentioned that you need capital to go through a Beta phase. Investors like to see traction before investment, try and release at least some of your product in a Beta and that way you have feedback to show the money people.

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