Chasing down money is a very time consuming endeavor for a fast moving entrepreneur. Sometimes it’s better to forget trying to coax venture capitalists or angle investors into putting up the needed capital. By the time you do, you could have spent that time making money and funding it yourself without having to give up all of your equity. In fact, not long ago, I spoke with an internet video gaming entrepreneur, who asked me for some advice.
He asks; “The question is do we do a fund run for the smaller amount to cover production first or do we do it as a whole.” Well, that is definitely one way to play it, still, keep it simple right? First such an entrepreneur needs to ask themselves a few serious questions:
How is your burn-rate right now?
What is your target release?
Are you in Beta Testing of the basic game now?
Or is that something which is constant?
One thing I’ve found with investors, if you let them, they will ask for the world (both virtual and real) – so, it’s important your plan looks tight, professional, and desirable. Let them compete to give you the money, don’t look too pathetic. “We have something really great here, and we intend to take it all the way.” Attitude! Think; Winning! and let that spirit shine through the whole organization. I suppose you are already doing that, if not an entrepreneur is well advised to reconsider their strategy.
The video game entrepreneur, quite an honest gentleman, asks; “I was also wondering if a milestone payment system would be better, where investors would only make a payment when each milestone is reached instead of having one lump sum paid at once.”
Okay so, I understand the entrepreneurial real-world practical thinking on this. Still you need to control the money (have it in the bank in advance). Perhaps you could structure it with “release guarantees” to the investors upon each milestone, and allow them to have the interest payments while it sat unused, until it was allotted to whichever phase of completion signified payments for your expenses.
Sort of like a three-phase construction loan – I actually like this concept, and I bet angle investors would too. Venture Capitalists may not like this scheme although the wiser ones who perhaps got caught during the Dot Com burst would feel more comfortable with something like this.
Nevertheless, I’d still require upfront investment, as you need to run your business, not chase down money every time you need more and end up with some excuse. Further, perhaps you need a Third-Party Trustee accountant type to monitor the releases as per the milestone targets? This is interesting indeed. If you have any comments, questions, or concerns on this topic then feel free to shoot me an email. But remember to please consider these points of contention, and think on it.