r/startups • u/punchCuddles • 2d ago
I will not promote Thoughts on taking money from anons? I will not promote
First round of outside capital. Small startup with growing revenue. Vibe of company seems to strike an immediate chord with a certain class of people.
Thing is, these are people without big "name brand" reputation. I like that in many ways. Possibly a big advantage in that they are faster to wire and hungrier and willing to help more. They are sharp, and clearly know a lot of things I don't about the world of capital and the behind the scenes game of thrones, but I'm wondering if there are things to be wary of? Like, should I do diligence on where they got their money from? Or is it better to not ask questions and just take the money?
I can't think of a way it could go south, but I've never raised more than 5 figures of capital before, and that was from known names, so my experience is very limited. Talking to some traditional VCs too, but I have a bit of a polarizing reputation so that could be a waste of time, whereas the anons seem ready to send.
Anyone point me to interesting reads/horror stories/success stories?
Thanks!
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u/Kind-Pop-7205 2d ago
Ideally, you bring on investors that have strong networks and are willing to use their network to help you, or who can advise you, or have other benefit to the business besides just money.
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u/tonytidbit 2d ago
Raising money is a whole spectrum as far as how much the investors becomes part of your business.
On one hand it can be a simple business transaction where they buy a small part and that's it. On the other hand it can be the startup almost getting sucked into their world with them sitting on your board, regular calls and meetings, networking events, and most of your actual business happening with other businesses in their network.
Sometimes you even raise money even though you don't need it, you just want the people and their network to be on your side helping you scale much much quicker.
But don't just accept money from people because you've got some distorted idea about them being better at business than you, because they're not on your side just because they've invested in your business. If their interests aren't aligned with you they'll throw you under the nearest bus before you even know you've been yeeted out of the office.
Plenty of founders have found themselves thinking they're safe as majority owners, only to end up with zero money and no business within a year or two, simply because the investors were in a position to make a vote or two in their own favor or some debt got converted into equity.
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u/Honest_Cut8827 1d ago edited 1d ago
This.
Dollars alone has a relatively narrow scope of value so bringing on a VC can potentially REALLY move the needle but please be sooooooo careful. Many founders have been pushed out of their own companies.
For context, my funding had been limited to bootstrapping, Angel investors and strategic investors before an exit - I would not personally trust a VC enough to partner with them…or I would try very hard to avoid taking their money.
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u/Warsel77 2d ago
Why would you NOT check the person / VC you are about to go do business with out - especially if they are not well known - they will be involved in your company going forward.