How we looked for investments and why in the end they were abandoned
Hello! So we have our own blog on Megamind, for which we express our gratitude to the TM company. My name is Anton and I represent the service of collecting reviews Mneniya.Pro . In this blog we will write in detail about the development of our project, as well as share interesting cases on the topic of reviews, conversions, increasing sales, loyalty and customer relations. Today we would like to talk about our experience in investor relations. First of all, this material will be interesting for beginners who are looking for financing options and choose a further development path. In the article, we touched on the topic of raising funds and share our thoughts on whether investors are really needed at the start of a business.
Looking for investment
We started the opening of the Mneniya.Pro service in 2013. Like many other start-up IT entrepreneurs, after hearing success stories about venture capital deals and reading startup publications, we believed in a fairy tale about good investors. And we were 100% sure that we were cool, and that any self-respecting investor would consider it an honor to invest in our project before launch. At that time, there was already a ready MVP on hand, in which we had to invest $ 500 of personal savings, but we were in no hurry to leave our main places of work. And instead of actively looking for the first clients, they began their activity by storming investment funds, trying to attract investment in the project and pass on some of the risks to them. Now I understand that it was stupid, but we learned from our mistakes.
The search for investments began with creating a table in Excel and entering there all persons who are somehow connected with investments in Russian Internet projects. In the vastness of the network, we found 105 representatives of the venture capital industry (foundations, business angels, etc.) and wrote a personal letter to each of them. In the letters we talked about the idea, and also attached additional materials - presentation, business plan, startup profile, CV founders. By the way, the spreadsheet from Excel is still preserved - I publish it in a blurry form so that no one is tempted to use it.
By sending 105 letters, we received responses from 8 representatives of the funds. I quote one of them, the rest looked approximately the same:
Thank you for the offer and the information sent. And what is your revenue now / how many stores are connected? We are ready to consider SaaS for e-commerce either with a large client base (hundreds of connected stores), on which you can run monetization models, or projects with revenue from $ 15 thousand per month.
Nevertheless, 2 funds invited us to Skype-call, and one business angel even agreed to meet in person. None of those negotiations were successful, therefore, after several months of searching for investments, a decision was made "to surrender to fate." That is, tightening belts tighter and leaving the comfort zone - we really believed in our product.
Ordered to survive
So, we left the main places of work and finally were able to devote ourselves entirely to the project. We did not achieve investments, and, except for ourselves, there was no one to count on. Each had some personal savings for which he could live and work, but there were still families - so his pocket was empty quickly enough. Naturally, about any investments in marketing, sales, etc. (according to the initial business plan) there was no talk. Perhaps only our wives continued to believe in us, but sometimes I find myself thinking that even for them we looked enough at that time ... sorry.
The more hungry a person is, the more aggressive he is - we became convinced of this again and again. True, they did not vent their aggression on others, but on the process of connecting clients. A few months after the start of active work, the Mneniya.Pro team still managed to demonstrate the benefits of using the service to several companies, which eventually agreed to become customers on a commercial basis. The transaction amounts were disastrously small, but they gave us the strength to move on. We were convinced that the hypothesis was confirmed, and that, with the right positioning of the product and active sales, it has the right not only to exist, but also to a completely normal life.
Refusal of investments
Hundreds of sent commercial offers, dozens of negotiations - as a result, several more companies connect to the service and we begin to believe in Mneniya.Pro with renewed vigor.
Suddenly, the project hit the startup accelerator. There, after selection, we were offered an investment of $ 20,000 for 12% of the company. I want to remind you that at that time the revenue was negligible, and the money was sorely needed.
After a little reflection and weighing all the pros and cons, we decided to abandon the tempting, at first glance, proposal. There were several reasons for this - firstly, the amount was small, it would hardly help to make a quantum leap in the development of the project. Secondly, under the terms of the agreement, investors received 2 votes on the board of directors against ours 1, that is, having a controlling stake in our hands, we actually lost the ability to manage the company. Investors commented on this clause of the contract quite prosaically: “Do not worry - this is standard practice, everyone works like that.” Maybe someone is happy with this approach, but at that time we decided to reconsider our attitude towards investments and temporarily slow down the venture history. It was necessary to focus on finding customers and improving the service.
So are investors really needed?
The product continued to develop, the customer base was replenished, and as a result, we broke the breakeven point. Already for working money they began to attract the first employees, first from friends and acquaintances, a little later - from the labor market. The team has new key positions - a marketing director and a sales director. This helped speed up customer acquisition.
Now the project involves 2 programmers, 5 sales managers and 1 marketer. Business grows and develops, benefits customers.
We recently tried to enter the Polish market, but the competition in the form of a strong local player Opineo.pl slightly adjusted plans. Over the next few years, our goal is to connect a thousand companies to the platform and become the largest in Eastern Europe, having trained customers to trust reviews on the Internet collected by the Mneniya.Pro service.
Looking back, I understand that if we had taken the money from investors, the situation would not have fundamentally changed. The project would develop now at the same level, the only difference is that there would be a “tail” in the form of investors. Here, most likely, the law is in effect - if you are destined to go through the "valley of death" and survive, you will overcome it without investment. You don’t have to go far for examples - take at least the Russian CallBack Hunter or JivoSite services, which continue to develop actively without investment. And they feel an order of magnitude more confident than their main competitors, who managed to attract external financing.