My app has 5 to 10K sign ups. When do I start looking for investors?

https://news.ycombinator.com/item?id=8957496

by UXDork • 11 years ago

9 9 11 years ago

news.ycombinator.com

How do I know when I need investor money? I'm waiting (what feels like forever) for the first company to finish test-running it before deploying to 19 grocery stores and more.

CyberFonic• 11 years ago

When you start generating revenue. You'll need to provide a business plan that correlates sign-ups to revenue generated and some credible extrapolation based upon your market growth to date.

orky56• 11 years ago

How quickly is it growing month over month? You want to convey predictable growth over a period of time if you want investor just by sign ups. A lot more to it but if signups are your primary indicator of traction, it's more about what the future holds.

nreece• 11 years ago

Wait until you have customers who will pay for the app, so that you have ongoing revenue to sustain your project as a business. Spend some on marketing. Once you reach up-to a 5-digit figure in monthly revenue (MRR), then try to hire one (or few) dev/devop people so that you can focus on other important areas like business development, sales, product development, customer support etc.

Investment makes sense (and you'll get a much better deal from investors) when you have recurring revenue AND you have to grow fast to the next stage (e.g. from a small team of 2 to a team of 5-10, from a few servers to many, from a local office to globally, from self-serve online sales to face-to-face B2B/Enterprise sales for which you need sales people etc.)

In short, evolve organically and delay outside investment until absolutely necessary for rapid growth.

saluki• 11 years ago

Taking no investments is the best investment you can make in your business.

I would recommend bootstrapping as long as you can. Then take investment in the future only when you really need it to scale things up, bring on employees, roll out version 2 of your app.

The longer you wait the more likely you are to maintain a larger percentage of the business when you do take funding.

Good luck in 2015, sounds like things are going well.

semmem1• 11 years ago

Care to share your app?

brudgers• 11 years ago

Microsoft basically bootstrapped for a decade before taking investment. It was in the form of an IPO and made 12,000 current [at the time] and former employees millionaires. It made the two founders and Balmer billionaires. Gates became the richest person.

Maybe you don't need investor money. If you don't need it, you probably don't really want it. The purpose of a business is not to raise money from investors...well maybe if you're running a con, but that's another story.

starwaver• 11 years ago

You'll probably need investors when you need the money to scale (more servers, employees etc). Or when investor money will get you significant growth (even when you don't need the money). My personal opinion is that you start looking for investors a month (how however long you think will take for you to get the money) before you deploying it to the rest of the grocery stores. This will ensure that you won't run into shortages of money when you are scaling up.

rahimnathwani• 11 years ago

Take as little as possible, as late as possible. Money comes with a cost (in terms of equity %, interest and/or liquidation preferences).

I suggest you create a simple financial plan. In Excel or Google Sheets, put months along the top, and each line item of expense along the left. Do it on a cash flow basis (i.e. book revenue in the month when you will receive the payment, not when you make the sale).

You can then total up each column to see your net cash in or out in the given month.

Then think about what could make you need more cash. Need to hire some sales people? Possible delays getting paid by customers? Need to scale up infrastructure before the related revenue will come in?

If you want to do this 'properly', all of the numbers in the main body of the table will be formulae, driven by a small set of assumptions (start dates and salaries of key employees, starting # customers, customer acquisition rate, monthly churn %). Then you can play with these assumptions to find your pessimistic and optimistic cash flow scenarios. This will tell you how much cash you need and when, for the most-cash-hungry scenario.

Then work backwards based on how much time you think it will take you to raise money, and when you can afford to spend the effort to do that.

If it's the first time you're putting together a monthly budget or financial model, then start simple. Don't worry about highlighting every input cell in yellow. Just make sure the big numbers make sense. Make 2-3 copies of the sheet (one for each scenario) and adjust manually to something that looks reasonable to you.

xrobotx• 11 years ago

why do you want investors ?

My app has 5 to 10K sign ups. When do I start looking for investors?

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