Ask HN: Is it possible to raise a seed round with no clear business model? | Hacker News Reader

Ask HN: Is it possible to raise a seed round with no clear business model?

10 pointstrimmer5 comments

We are a brand new music startup with 5k users (in 3 months), growing at 15% every week.

We cannot monetize the content (don't pay royalties, stream through other services) and we're having a hard time coming up with a business model for the investors we're in talks with. The business models in digital music are not yet completely validated, and will possibly evolve.

We aggregate quality data, and have a clear exit strategy. Do you think that having an exit strategy is enough to raise this round?

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5k users is light to raising anything but either Friends and Family or a round from super-passionate investors who might be a part of the 5k users (and that will only happen if they are over the moon with your product).

No clear business model works if you have proven strong growth / viral growth, with at least 2 more orders of magnitude of users, at least. You are off to a great start. At this rate, you'll have 10k+ users in a month and ~200k users in 26 weeks. But, that's not quite enough growth, in 26 weeks to get VCs excited (thought it will probably get you an angel round).

So, how do you get where you need to be? Well, over the next 26 weeks, can you do something to increase the growth rate a little every week? How about a lot? If you figure that out, you'll get the type of hockey stick growth that'll allow you to raise big money at a crazy valuation.

Snapchat raised a couple million or so and I'm still not sure how a billion-dollar self-destruct sexting app can be monetized "that much".

There is an important rule if you are outside of funding circles or solid networks where rich folks can throw cheap money at you, and that is to only raise capital if you need it.

5K is nothing right now, although if you come back in a year and say you have 50K and they spend an hour each day, everday on the app, then you can easily monetize through paid-content and/or ads.

Think wisely before you make a move for investor cash.

A direct answer to your question is 'anything is possible these days', but I'd like to leave you with a quick thought:

Stop trying to

>[come] up with a business model for the investors

and really drill in on

>we aggregate quality data

In my experience, the times we focused on what the investors 'might' have wanted we failed. The seven figure seed rounds came when we focused on innovating around [insert secret sauce here].

Start talking to people now, if you do indeed have 50k ppl in ~4months and maintain the growth rate I'm sure some of the people you'll talk to now will notice.

How much money have you raised so far? And how much money are planning to raise at this round?

Sounds like an angel investment would be a better fit.

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