April 30, 2015 at 10:52Why did we refuse 3 investment offers?
Friends, hello everyone! So we have a blog on Megamind, for which many thanks to the TM team. My name is Alexander and I present a simple and convenient ticket system for small teams called Teamdesk . We openly talk about our development with the publication of all figures, plans and the inner kitchen. Today we’ll talk about investment.
To date, we have already received 3 offers on investing in Timdesk from various investors, although the project was launched just a couple of months ago and did not earn a penny. We have not seriously considered any proposal. This may seem strange, especially when hundreds of startups are trying to get financing, but we have our own plan ...
When we first launched our first “adult” project 5 years ago, the industry of IT startups and venture financing was just emerging in Russia. Then the President did not meet with projects, the state did not allocate billions for innovations, there were neither FRII, nor API Moscow, nor more than a hundred venture funds of different stages investing in IT. It was just the beginning. We then understood that the investments seemed to be needed, but we did not know how and why to get them.
One way or another, we managed to attract more than $ 1,000,000 in 3 rounds from different investors, and this gave invaluable experience, which says that it is still too early to attract investment in our ticket system! Next, let's go through the points:
If someone paid for what you are doing, this is at least some indicator of the adequacy of the project. So we want to go this way in order to prove to ourselves the demand for the product, to better understand who is willing to pay and how much. Understand the first channels and cost of attracting customers. Finally, confirm our Business and Financial Model .
Present 2 dialogs. First: “Our Help Desk has 50 active users, 5 of whom are paid customers with ARPU 3,000 rubles. There are at least 2 working channels for attracting customers, where the CAC is 3,500 rubles. ”And the second:“ We have a prototype and 50 users, we don’t have any sales yet, we don’t know how much and for what we will pay. ” Which option do you have more confidence?
Excess money is always worse for a startup than their lack is a fact. The current team of Timdesk has no experience in attracting investments, no experience with excess resources. When you have a couple of millions behind you, you can not puzzle over how to do something not for 100,000 rubles, but for 10,000 rubles. or generally free. You can not focus on the most important thing, but try to do everything at once - that is, money!
When a company (team, product, processes) grows harmoniously with revenue, it turns out to form a skeleton or foundation for further rapid growth of the company. This path is ideal for Timdesk and his teams. Such a company is not afraid of either crises or competitors.
But here I am only talking about a specific, our case. There are a million examples when experienced founders raised a lot of $ right away and put them into action very efficiently. They knew what, how much and when money was needed. They knew what to focus on right now and the resource in the form of an account with many zeros at the end worked like fuel for a rocket.
An incredible amount of energy and time is spent on attracting each round. Hundreds of letters, dozens of meetings, preparing presentations, conducting Due Diligence, etc.
If you turn to the principle of Parret and this approach, then you need to focus right now on finalizing the product to the first paid version and receiving live money from customers. What are we actually doing!
Suppose that if we began to actively attract a round, then in the best case, in 3 months (objectively six months) we would see money in the current account. Another 1-2 months would be spent on hiring and including programmers in the work, another month - new functionality. In total, at best, only after 4-6 months, our customers would see a return on this round. While the paid tariff with full focus on finalizing the product, we plan to launch it in 1 month and see the first money from customers.
This approach will allow in the same 4-6 months to receive revenue in the region of several hundred thousand rubles and have sufficient resources for development without investment in principle.
In the current format, our help desk may well exist as an IP or as a simplified LLC. All decisions can be made in 5 minutes and will not require bureaucratic documentary support (protocols, approvals, etc.). For management reporting, the Excel spreadsheet will do well, and the plan for the coming month will be fixed in Google Docs.
Now imagine a situation where there is a fund among your shareholders. This is immediately at least LLC, as a maximum offshore somewhere in Cyprus, BVI or Delaware. The signing of the simplest protocol will require coordination with the lawyers of the fund, it will be signed by leisurely nominee directors in Cyprus, etc. This is good if you have a lawyer / assistant to whom you can unload all this paperwork. And if not?
In general, each new participant in the project (the founder) exponentially increases the time and number of communications for any action. And if you are "lucky" to take money from the state. Fund - lay another x2.
In most cases, an investment project implies that it will either die, be sold, or go public. Few venture funds are interested in a stable, profitable business that generates net profit and dividends. Funds just work differently.
We are building from Timdesk a company that will create and develop the best ticket system in Russia and the CIS for small and medium-sized businesses. Which will be profitable and will become No. 1 on the market of Russia and the CIS. If there is something “innovative” here? Unlikely. Will the fund of their such project be able to somehow quickly and easily? Not sure.
If the investor still does not understand at the stage of negotiations where he will be able to attach his share later, then he will not work. And the option, we will begin to pay dividends in a year or two - usually not interesting.
These are the main motives that so far stop us from attracting investment. This does not mean that they will not be at all, it means that we do not need them at this time and in the current situation.
To date, we have already received 3 offers on investing in Timdesk from various investors, although the project was launched just a couple of months ago and did not earn a penny. We have not seriously considered any proposal. This may seem strange, especially when hundreds of startups are trying to get financing, but we have our own plan ...
When we first launched our first “adult” project 5 years ago, the industry of IT startups and venture financing was just emerging in Russia. Then the President did not meet with projects, the state did not allocate billions for innovations, there were neither FRII, nor API Moscow, nor more than a hundred venture funds of different stages investing in IT. It was just the beginning. We then understood that the investments seemed to be needed, but we did not know how and why to get them.
One way or another, we managed to attract more than $ 1,000,000 in 3 rounds from different investors, and this gave invaluable experience, which says that it is still too early to attract investment in our ticket system! Next, let's go through the points:
1. The difference in the evaluation of a startup, when it has at least 1 client and 1000 rubles from customers and not - many times more
If someone paid for what you are doing, this is at least some indicator of the adequacy of the project. So we want to go this way in order to prove to ourselves the demand for the product, to better understand who is willing to pay and how much. Understand the first channels and cost of attracting customers. Finally, confirm our Business and Financial Model .
Present 2 dialogs. First: “Our Help Desk has 50 active users, 5 of whom are paid customers with ARPU 3,000 rubles. There are at least 2 working channels for attracting customers, where the CAC is 3,500 rubles. ”And the second:“ We have a prototype and 50 users, we don’t have any sales yet, we don’t know how much and for what we will pay. ” Which option do you have more confidence?
2. Investing corrupts
Excess money is always worse for a startup than their lack is a fact. The current team of Timdesk has no experience in attracting investments, no experience with excess resources. When you have a couple of millions behind you, you can not puzzle over how to do something not for 100,000 rubles, but for 10,000 rubles. or generally free. You can not focus on the most important thing, but try to do everything at once - that is, money!
When a company (team, product, processes) grows harmoniously with revenue, it turns out to form a skeleton or foundation for further rapid growth of the company. This path is ideal for Timdesk and his teams. Such a company is not afraid of either crises or competitors.
But here I am only talking about a specific, our case. There are a million examples when experienced founders raised a lot of $ right away and put them into action very efficiently. They knew what, how much and when money was needed. They knew what to focus on right now and the resource in the form of an account with many zeros at the end worked like fuel for a rocket.
3. Investment is a time that we do not have
An incredible amount of energy and time is spent on attracting each round. Hundreds of letters, dozens of meetings, preparing presentations, conducting Due Diligence, etc.
If you turn to the principle of Parret and this approach, then you need to focus right now on finalizing the product to the first paid version and receiving live money from customers. What are we actually doing!
Suppose that if we began to actively attract a round, then in the best case, in 3 months (objectively six months) we would see money in the current account. Another 1-2 months would be spent on hiring and including programmers in the work, another month - new functionality. In total, at best, only after 4-6 months, our customers would see a return on this round. While the paid tariff with full focus on finalizing the product, we plan to launch it in 1 month and see the first money from customers.
This approach will allow in the same 4-6 months to receive revenue in the region of several hundred thousand rubles and have sufficient resources for development without investment in principle.
4. Investments are not only opportunities, but also many limitations
In the current format, our help desk may well exist as an IP or as a simplified LLC. All decisions can be made in 5 minutes and will not require bureaucratic documentary support (protocols, approvals, etc.). For management reporting, the Excel spreadsheet will do well, and the plan for the coming month will be fixed in Google Docs.
Now imagine a situation where there is a fund among your shareholders. This is immediately at least LLC, as a maximum offshore somewhere in Cyprus, BVI or Delaware. The signing of the simplest protocol will require coordination with the lawyers of the fund, it will be signed by leisurely nominee directors in Cyprus, etc. This is good if you have a lawyer / assistant to whom you can unload all this paperwork. And if not?
In general, each new participant in the project (the founder) exponentially increases the time and number of communications for any action. And if you are "lucky" to take money from the state. Fund - lay another x2.
5. We have different goals with investors
In most cases, an investment project implies that it will either die, be sold, or go public. Few venture funds are interested in a stable, profitable business that generates net profit and dividends. Funds just work differently.
We are building from Timdesk a company that will create and develop the best ticket system in Russia and the CIS for small and medium-sized businesses. Which will be profitable and will become No. 1 on the market of Russia and the CIS. If there is something “innovative” here? Unlikely. Will the fund of their such project be able to somehow quickly and easily? Not sure.
If the investor still does not understand at the stage of negotiations where he will be able to attach his share later, then he will not work. And the option, we will begin to pay dividends in a year or two - usually not interesting.
These are the main motives that so far stop us from attracting investment. This does not mean that they will not be at all, it means that we do not need them at this time and in the current situation.