Ask HN: Just received a small amount in funding. What do we do now? | Hacker News Reader

Ask HN: Just received a small amount in funding. What do we do now?

7 pointsrheotron7 comments

My start up just recently received a small amount of seed funding from an incubator ($5000). My team is made of three of us, none of us have ever really done anything like this before (we're all technical). So my question is, what do we do from here? At this point, we have a prototype that works really well, but we're running it off a server that one of us is hosting and I think we need something bigger. What things should we be looking at to do now that we have some funds? Do we need to start talking to lawyers, register as a company, etc?

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Use the money to prepare yourself for a large amount of funding. One of the first things they'll tell you at YCombinator is that vc and angel investors are very particularly about a company's legal structure. pg has open sourced the docs here: http://ycombinator.com/seriesaa.html Pay whatever you need to pay in order to get that done properly.

$5,000 is a small enough amount of money that the best way to use it is to set yourself up for the next level.

That's pretty good advice, but I'd hold off on spending it on legal affairs until you really need to. $5000 gets you a long way when it is spent on hosting and bandwidth, it's a drop in the bucket when you are spending it on legal advice and incorporation fees.

Use your $5,000 to leverage it to get you another $10,000 or $20,000 in sales, then start thinking about another round and spending money on legal advice and other niceties.

Have you put some time into thinking about how your product can provide a meaningfully different user experience than the competition? Do you understand what the competition really is? Telling a story about why users will pay for your product is part of making a compelling business case for the next round - your margins won't matter if nobody wants it.

You don't need to spend thousands on research to start getting a better sense of what problem you're solving. Send a note to http://uxhours.com/, or pick up a book on understanding user experience. Mike Kuniavsky's 'Observing the User Experience' is an accessible if not particularly comprehensive starting point; Vijay Kumar's 101 Design Methods is a broader look at the design process.

Have you checked the Catalyst program from Softlayer?[1] It provides enough value in server stuff to run your service for free in quite a decent way and will let you put the money in other things like lawyers, registering, etc.

[1] http://www.softlayer.com/partners/catalyst

Start thinking about getting clients. It's all that counts for serious investors. If you don't sell anything you haven't validated your business model and that means it will be hard to put a future value on what you own or what you're doing.

Find a mentor who can help for free, and who will take the time to learn more about you and your startup than HN commenters can in a random thread.

1. Get a server. 2. Incorporate, if you aren't already. 3. Work like hell. 4. Look towards customer base.

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