Entrepreneurs Get Creative to Get Funding | Hacker News Reader

Entrepreneurs Get Creative to Get Funding

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19 pointsMrinal9 comments

A $90k for 25% stake seems to devaluate the initial $500k investments. Are initial investors usually ok with this type of devaluation, or are they just happy to see more funding since they don't want to put more money into it?

I'm guessing it's a mistake in the article. End of Summer was not too long ago, so a company with about $500K in the bank should be worth more than $270K premoney.

I just thought of another explanation: Maybe the TV show only airs if a deal gets done, so the founder reasoned the publicity was worth a bad valuation?

I doubt the part of accepting the money for publicity. I think they get plenty for just being on a nationally syndicated show. (Kudos to them on WSJ and Shark Tank) They might have even gotten better publicity for standing firm on their original offer.

http://www.youtube.com/watch?v=SOSfMzwA5C0

They accepted an offer with a 6 month buy out clause so it is possible they never intended on keeping the money.

I just have major doubts about their numbers. The way the founders present them is very suave but thinking deeper in is really questionable.

Other highlights from the show are in: They had 40% of University of Arizona (about 14k users) in 8th months.

30k revenue in 1 year.

Not exactly a smashing success, but a start. Just a few doubts when examining them deeper.

The article seems to contradict itself; Shark Tank gave them a $270K pre after they "walked away with $500K in investments" at the end of the Summer? Maybe they meant all investor owned equity is now 25%?

  Notehall.com, one of 10 ventures chosen to participate in
  the three-month summer program, walked away with about
  $500,000 in investments.
  ...
  Through the show, which aired Notehall.com's episode last
  week, Mr. Conway landed the company an additional $90,000
  after agreeing to give up a 25% equity stake

No the Sharks usually only invest if they are getting a sizable percent of ownership so I think that's correct. They must have needed the money pretty badly.

I wonder why on earth someone would burn through $500k in less than a year to develop a class notes sharing site, given the developer abstractions available today.

Maybe he tried to launch a blitzkrieg marketing plan in many different universities at once, with little testing or compartmentalizing?

Maybe just too much staff?

I get the feeling from the article that there's something very wrong with this particular startup, or at least the founder in question.

"No turning back" sounds like a poor excuse to keep dragging a startup along, trading 25% and a boatload of your time through some investment TV show for just 90k sounds like you've given up on actually working your ass of to develop the product/business, or for that matter, actually being sort of in charge of it if it somehow does manage to survive.

The low valuation is not the problem, but twenty-five percent at that valuation? Better do some consulting to scrape that cash together. It might make sense in some situations, just sounds like a bad deal to me if you also have to be on some TV show to actually have a chance at getting it.

The article is rather light on details and – as others have already pointed out – on math that makes sense, so I might be getting the sitation completely wrong, but this just strikes me as a really poor way to run a startup.

That line jumped out at me too:

"I had invested my life savings and I knew there was no turning back," says Mr. Conway, a 2007 graduate.

Life savings? 18 months out of college?

I have it on good authority that most of the deals on Shark Tank don't actually close- it's just good TV. In which case Notehall was "stupid like a fox" and doing it just for publicity. They were the top Google trending term the next day.. better bump than most blogs will get you.

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