Ask HN: When is it too early to raise? | Hacker News Reader

Ask HN: When is it too early to raise?

5 pointscrobertsbmw3 comments

Cliffnotes: Can you raise money without any traction?

I have cofounded a company with my buddy of mine (http://pennypledge.co?ref=premium). We have been in development for around 8 months. Now we have a (semi)finished product but are having a hard time getting users.

Our product is geared towards youtubers and bloggers and the issue is that we have the common chicken and the egg problem where we essentially need two sides of a market. We need youtubers to join our platform and we need their viewers to sign on and support them through our platform. So far, youtubers claim they love the idea of the product and can see it really blowing up. But there isn't a lot of incentive for youtubers to sign on until it does.

A good friend (who founded a very successful startup) is encouraging us to just take a month off and go raise a million dollars. He thinks what we are doing will be right inline with a ton of investors that he has met with. And that if we had a million dollars in the bank it would add a lot of validation to what we are doing and solve a lot of our problems.

I am scared that if we try to go raise money now, the common question will be, "why don't you have 50,000 users and 100k in revenue?" Do we have a chance at raising a million dollars with an idea, a prototype, and lot of people saying things like, "I can see this being the future of the economy."?

If you have good personal connections and/or luck, you could possibly raise money at the stage you are at.

Would I invest?

No.

One issue is you are Google-dependent, and Google is a competitor in that they pay advertising revenue to content creators. If they decide to cut you off or make life hard for you, you are doomed.

The great startup failure story of 2014 in my mind was Gratipay,

https://gratipay.com/about/stats

formerly known as Gittip, and you see it was was growing exponentially when some top users defected over personal politics, and their payment provider shut down, etc.

You've got to have a good argument why you can succeed while your competitors have failed to thrive.

With YouTube, Google isn't just an alternative, they're a direct competitor. YouTube Fan Funding is built-in to the platform:

https://support.google.com/youtube/answer/6052077?hl=en

The product is the easy part. With the payment platforms available today, a fan funding platform could be a weekend hackathon project. I'm sure you've put more effort into it than that, but if the weekend project has users and yours doesn't, then it doesn't matter how good the code is. Getting the users onboard is the hard part. If you don't know how to get users, throwing money at you isn't going to change that, and isn't going to be a good investment. You won't be handed a million dollars.

If so many YouTubers say they love the idea, then you need to get them to adopt it. Saying they'd use it and actually using it are different things -- people like to tell you what you want to hear. This isn't a chicken-and-egg problem. You only need to convince _one_ high profile YouTube personality to use your platform, and you have a user base. You don't have to convince anyone else to join: they'll do that for you by using your platform instead of FanFunding/Patreon/etc to ask their fans for support. If you haven't already done this, then no investor is going to believe you have the hustle to build this into a billion dollar business that'll give them the return they're looking for. They'll also wonder how you know you built a product anyone wants without doing customer development.

Reach out personally to your potential early users, those popular vloggers and bloggers and game casters that already ask their fans for micro-donations, and convince them to try you instead. Send some info to their house along with a box of muffins. Show up at a convention they're going to be at and talk to them. Just figure out how to make contact and get their attention. Offer them perks like foregoing fees they're paying their current donation platform, and promoting their channel on your site. The foregone fees are your marketing expense. Once they're onboard, their supporters will become your first set of users on that side of the marketplace. Move on to the next personality again and again until you have enough people on board that other creators are signing on without you having to recruit them.

Facebook didn't start with the world, they started with one school. Only after they had established a social network in that school did they open up to the next, and build one there. You don't start with the world.

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