New answers tagged investors
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Derek,
I run ContractIQ - A marketplace where startups discover elite outsourced product development teams. So I am up close to the issue you've at hand.
There is a very small niche of dev shops that are run by entrepreneurs who have done product startups (or) products over and over. They understand customer development intuitively and the trade-offs ...
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So, is it highly improbable that an investor would throw their money
into a product/company produced by a person with student loan debt?
No
Is it even a factor, usually?
Probably not.
Why would an investor invest in a product that's being controlled by a
person who is in debt?
Because, unless the debt is from an addiction or problematic ...
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pay the fees for drafting the agreements
Hmmm ... the most common form I've seen is each party bears their own legal expenses. So the kindest interpretation is that if you want to change it, you carry the can.
use a legal firm of the investor's choosing
Now this is what we call tying (competition law 101). The nasty interpretation is that the ...
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Derek, Outsourcing to keep initial costs down is OK in most cases, especially if technology is not the core of your business model. If technology is critical to your business model, investors would like to see that you can attract the required lead technical person to drive the engineering for you. You can still use outsourced programming team for the ...
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In reality, so-called “founder’s” shares are simply common stock, issued at the time of startup incorporation, for a very low price, and normally allocated to the multiple initial players commensurate with their investment or role. But that’s only the beginning of the story.
These shares are allocated and committed, but not really issued and owned (vested) ...
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This is always a problem when investment is in people that can walk out the door (or get hit by a truck). Ultimately it is about faith/trust ... you can put in all the legal clauses and rack stock options to milestones but if the angel investor is the wrong fit for the startup, then it will only be a waste of dumb money. Some questions you should ask are
...
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At the end of the day, the investor just wants his money back with profit. That's it. Everything else is just the investor's way of predicting whether that's gonna happen or not. Yes, traditionally investors are hesitant to invest in teams without a tech co-founder. And their reasoning is valid: You're a tech company and there isn't one person on your ...
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I heard a good analogy once talking about kids and nannies and how that relates to software products. Outsourcing your software development is like hiring a nanny to raise your children. Sure they will "care", but ultimately they are just kind of doing what you want them to do and babysitting your child, making sure they aren't getting in to trouble and ...
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There are no rules for what a VC or Angel will invest in. They make a judgement call about your business and your team. Some that outsource the MVP will get funding, some that build the MVP inhouse will get funding.
You mention traction, they will care a lot more about that than who built the MVP.
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If you're able to validate a business model with an outsourced MVP then I think that most investors aren't going to care that it was outsourced. However, I doubt that you can outsource the creative process that goes into creating an MVP that demonstrates a business model.
If you were hired as a contractor to build an MVP, how would you feel working for a ...
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As a programmer, we have generic code all the time - its usually the technical glue that holds a program together and allows it to work without actually being a program in itself. Think of a website - the web server is 'generic code', and nothing to do with the website code. The dev might want to take his equivalent of a webserver, or parts thereof, away ...
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The developer has no problem assigning the code, however, he won't assign it unless we give him the rights to re-use some of what he calls "generic" code.
You need to clarify what "generic" and "reuse" means.
It would seem that the core issue here isn't that the developer has discovered a novel, groundbreaking approach that will generate millions and ...
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Before this point, he was your good partner and now he wants something which puts your business at risk (at least you see it in that way). I work with programmers, they tend to reuse their code whenever possible. You don't need to be a programmer to know how copy/paste feels good. Also this is the only guarantee he has for his effort (he is not paid for that ...
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I think you are about to commit a big mistake if not already committed. There are many great inventions forgotten due to weak execution. You cant just build a factory, so that you build everything that can be built out of your invention. Yes you dont give it to big evil companies, but you are likely to end up with a product that has a patented thing that is ...
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If he has had it on his servers and if you havent signed a contract and the developer is still asking you if he can keep some generic code, I would just the fella keep it. Of course, you could make an agreement about the generic code and how if he ever makes money from it, he should pay you royalty et cetera. In reality, it is almost extremely difficult to ...
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First of all don't consider investors as brainless money men. Most of them have high business skills and good market and government connections (at their industry). Since they think more financial than emotional, you can buy back their equity at any time if your offer seems good to them.
If you are not certain about details and how much does your Rolls ...
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If there's nothing signed, you're on very squishy ground and you should consult with an attorney asap.
If there's an NDA in place, that doesn't evaporate if you don't include him.. unless the agreement says otherwise. If it says he can't talk about the project elsewhere, then he can't. You just have to be willing to back it up because a contract without ...
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IANAL and I don't know what rules/conventions apply in your jurisdiction.
However, if it is truly "generic", it shouldn't take him long to re-create it in his own time.
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If you have paid for everything to date then you still own 100% of your company. Given what you have outlined, I would spit-ball the current, pre-money valuation of your company at $1,000,000 which would mean the $2,000,000 investment is worth 66% of the company.
The $1,000,000 is what I call "the magic number" It's high enough that you are rewarded ...
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If he wants to limit his risk by paying in drip, then he should also be willing to lower his equity stake: lower risk = lower reward. So for instance, you could counter his offer like this: "At the moment I need X to build my business. If you give me X in one lump sum then I'll give you Y% equity in the company and if you want to give me X in 4 installments ...
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