There are an awful lot of small software companies which didn't need much more than "capable of writing software" and "at least as much sales skill as a clerk at Nordstrom's" to get started. Many of them don't sound like particularly "good ideas."
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Replying to @patio11
what funding models do you see small companies tending to take? VCs tend to want outsized returns (though there's
@tinyseedfund!!) so I'm not sure what other options there are1 reply 0 retweets 2 likes -
Replying to @amyngyn @tinyseedfund
I'm so pumped for TinySeed (disclaimer: tiny LP) and similar things, as I think there are few good scaled options here. Overwhelmingly founders use personal savings, family funds, sometimes moonlighting or consulting, and credit cards (!) then grow from revenues.
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Also there exists a bit of investment by business partners at terms which are much less generous to founders than prevailing terms in SFBA from professionalized angels or seed funds. Oh the stories.
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Can you illustrate the difference in terms, generally speaking?
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So hypothetically if I, as angel investor operating with SFBA norms, agree to purchase $100k of equity in your company at maybe a $4 million valuation, all parties know that I don't get a share of your cashflow, you don't owe me that if the company goes bust, I don't own 50~80%.
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Replying to @patio11 @thescottsb and
Now invert all of the above and add material operational control but no material operational responsibility. That would be a pretty bad funding source, right?
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You're saying that inverted scenario is typical or at least unsurprising for deals outside of Silicon Valley-type venture capital? Even somehow getting 50-80% ownership on a investment that should only be 2% of diluted value per basic math?
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Saying that people routinely get offered, and sometimes take, $100k at an implicit pre-money valuation between $25k and $100k (often obscured by “partnership”).
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