Forums: Discussions for entrepreneurs and small business.

Hey guys,

Our startup company, PocketCents.com, has been doing pretty well.  We actually created the plan and incorporated 2 years ago but didnt really start things rolling until earlier this year.  The issue we ran into was entirely financial.  We originally had our minds set on getting a large amount of startup capital from equity to start things off and have enough budgeted to handle marketing on a large scale, but the economy here in Detroit seemed to slip out from under us as we got things started and many of the private investors we had lined up lost a lot of their money in their other investments (primarily real estate).  We cant control the economy, so we decided to start anyway on a smaller scale than we originally intended.  The positive news is that we are following the numbers we set in the plan at almost an exact 1/10th scale and we are scheduled to break even in about 2 months.  From everyone I have talked to, we made the right choice and the fact that we are proving that our idea is successful should help us get growth funding if we go for it.  But here's the big question:

How much do we ask for if we are already doing alright and just want to grow as large as we possibly can?

It makes sense to me that we would ask for quite a bit more now that we are already up and running and have some proven growth.  However, since things are already running pretty smooth and any little amount we get would be fuel for growth, we dont have as great of a need anymore.  I was told to avoid giving out equity as much as possibly as long as things are growing.  I'm interested to hear any opinions.

Phil Kanaby
Partner / CTO

www.PocketCents.com

 

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Phil,

While I can't give you a specific amount without more details, I will offer some general comments:

1. The "right" (or optimum) amount to seek is usually a balance between several factors - How it will be used, how much 'run way" it will provide, how it's use will impact the valuation as well as the cost of the capital and the acquisition cost.
2. The amount should be derived from the planning process and should be attached to specific objectives and time frames.
3. Asking for more or less than is proper can be a turnoff signal to investors.
4. Accepting more than you need can be very expensive in the long run.
5. Accepting a little because "any little bit helps" can lead to a more desperate situation if the amount really won't get you a logical next round position.

Hope this helps.

If you want to discuss your specific situation , feel free to send me a PM or contact me directly.

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