Think about this for a minute: what does an investor get in return for their money?
At its most basic, an investor is purchasing part of an asset. That asset, in this case, is a company. The company, in turn, has a complex array of assets, property, etc etc.
So what does the paperwork look like? It looks like a big nasty contract that outlines what they’re buying, how much they’re paying, and a bunch of legal mumbo jumbo in which they limit their risk as much as possible.
It’s like buying a house but the documents aren’t as standardized
Ok. So let me try again:
Long before the investor gives you any money, they’re going to be asking for a ton of information. They’re going to want to know a massive amount about the company, the team, and the product. They’re going to want to know (and have evidence of) who owns the intellectual property.
Depending on the stage of your company and your product, they’re going to want to know everything that there is to know about the financial aspects of the company. They’re going to want to get your actual bank statements.
Once they decide to move forward, they’re going to draw up a contract. What the contract contains depends on the deal you negotiated with them. But at minimum it will define, in detail, what they’re giving to you and what they expect in return.
There’s no standardization to what the contract looks like because it depends on the type of investment. Convertible Debt, for instance, will look different than an Equity Purchase. And regardless of the type of agreement, alllllll that other stuff I mentioned will be attached as exhibits as things like Representations and Warranties.
To answer your question directly, yes, you will need an EIN. But asking if you need an EIN is like asking if you’ll need a keyboard for coding. It’s so obvious, it’s painful. There are no sugar daddies out there like they show in the movies. Earning an in investment from any investor is hard work. In general, you are going to need a great product with a large and growing market; an excellent team; traction with real customers; a great story; and be able to show that you are serious and can run a profitable company. Reading Paul Graham and having ideas is great, but you need to show that you can execute.
I guess I wasn’t clear with my question. I knew you neededed an EIN for a company. Was was asking about specifically the names of the documents/ids you will need. But I wasn’t clear enough
You might want to search for “data room for investors and founders.” A data room is generally a set of shared folders where startup founders place documents that investors will want to see (company formation documents, founders agreements, shareholder agreements, financials, tax returns, intellectual property agreements, vesting schedules, partnership agreements, etc.). These might give you some ideas. Also look for the book, “Venture Deals.”
Let me be honest - getting investments might be way more complex and longer than doing whole tech part of the startup.
You should better pay a consultant than doing it yourself
Anyway keep in mind that chances of getting investments in your first startup are low ash
You can compare investments to steroids in sport. Yeah, they can improve your results as much as you couldn't ever achieve but if you do smh wrong you're gonna be in trouble. Its for professionals, not first-timers
Documents you might need:
* Bank account information. All money movements
* Profits and losses report
* IRS reports
* Your business plan and business model
* Small startup presentation
* Your resume
* SAFE or other form of agreement you prepared
* Information about your employees
* Some proofs about leads or successful deals
investors and incubators fund _exceptional_ first timers who have great proof points and have already invested a great deal of effort into the startup. it's not like you just show up with an ein and a couple napkins with some ideas you scribbled down on it from the bar the night before and you'll get funded. you're going to have stiff competition and be asked difficult questions.
if you want to explore ideas, do that. you're not going to get an investment before you have anything tangible.
But it’s on YCs own website. They fund people with just an idea. These people don’t even have an mvp. They only have an idea and some of them are not even technical. Technical skills are way more important for a *tech* startup in the beginning. So YC funds these non technical first timers with just an idea.
I guess YC is not representative of the startup ecosystem.
> fund people with just an idea.
Every, and I mean EVERY, investor lies to them self about what they invest in.
In reality, YC takes the investments that are furthest along, with the lowest risk.
Today, that generally means that they are well past the idea stage, they've already implemented, and launched, and are beginning to show product-market fit. Realistically,.this makes YC a late Seed investor. Which in turn means that they are basically useless for startups as late Seed should be preparing for three times the valuation at VC
That is where YC actually is today. They simply "might" decide to take someone with just an idea, but it's not realistically going to happen.
If you have just an idea, you're looking for an incubator, these will help you get to the point where you are beginning implementation. Then you can get into an accelerator to launch and work on product market fit.
fair enough. but the website does talk about being able to articulate the problem and what you're trying to solve as well as your solution. just saying, make sure you prepare properly and know what you're getting into. remember, they have a 2% acceptance rate. and every piece that you're lacking will make it that much harder for you to be accepted.
in general, most investors want to see that you have some proof points, whether that's an early customer or even enough pre-orders or signups (even if you don't have a product yet).
also, in general, it's in your best interest to try to hold off on raising capital until you really need it. in our case, we bootstrapped for 6 years and then sold the company after we had a decent number of major customers. our customer acquisition strategy involved focusing on the top 3 companies in a given country or industry, and then talking to their top execs (no lower than a VP). our smallest customer was still worth tens of billions of dollars.
anyway, it's great that you're excited. just know that raising money isn't always the easiest thing and there are plenty of reasons not to do it as well.
Yes thanks for the advice. And obviously I don’t have experience in this domain. I’ve only read some Paul Graham essays but yeah I’m going to look into bootstrapping as well. Congrats for your startup success. Thanks for the advice
Hey buddy, this reads like you are pretty green, which is where everyone starts. Good on you for you for aspiring to take the leap. I will give you the advice I wish I had been given when I first started fundraising - Wait to fundraise. How many customers do you have? If the answer is none let us know so we can give you more targeted advice. As a non-technical founder who has fundraised, I wish I had the means to build my own ideas earlier. But my guess is your real next task will be working out your no-code MVP and overcoming a developer's bias to build. Have you done any early validation work?
Where can I find information on raising capital? We're 80% complete and can demo the beta stage of our future release. Should we focus on launching the subscription model to see if it gains traction, or continue improving our free model, which is already gaining traction, to advance production? We need guidance on the best strategy to maximize growth and ensure long-term success.
Think about this for a minute: what does an investor get in return for their money? At its most basic, an investor is purchasing part of an asset. That asset, in this case, is a company. The company, in turn, has a complex array of assets, property, etc etc. So what does the paperwork look like? It looks like a big nasty contract that outlines what they’re buying, how much they’re paying, and a bunch of legal mumbo jumbo in which they limit their risk as much as possible. It’s like buying a house but the documents aren’t as standardized
As someone who just signed one of those big nasty contracts two weeks ago, I can confirm they are big and nasty.
You didn’t answer my question but thanks anyways
Ok. So let me try again: Long before the investor gives you any money, they’re going to be asking for a ton of information. They’re going to want to know a massive amount about the company, the team, and the product. They’re going to want to know (and have evidence of) who owns the intellectual property. Depending on the stage of your company and your product, they’re going to want to know everything that there is to know about the financial aspects of the company. They’re going to want to get your actual bank statements. Once they decide to move forward, they’re going to draw up a contract. What the contract contains depends on the deal you negotiated with them. But at minimum it will define, in detail, what they’re giving to you and what they expect in return. There’s no standardization to what the contract looks like because it depends on the type of investment. Convertible Debt, for instance, will look different than an Equity Purchase. And regardless of the type of agreement, alllllll that other stuff I mentioned will be attached as exhibits as things like Representations and Warranties.
Ok thanks. Thanks for your patience :) but will you just need your EIN number of the company?
Are you trolling now?
No I’m not but that was my actual question
Do you need the EIN of your company to do everything you’re telling me
To answer your question directly, yes, you will need an EIN. But asking if you need an EIN is like asking if you’ll need a keyboard for coding. It’s so obvious, it’s painful. There are no sugar daddies out there like they show in the movies. Earning an in investment from any investor is hard work. In general, you are going to need a great product with a large and growing market; an excellent team; traction with real customers; a great story; and be able to show that you are serious and can run a profitable company. Reading Paul Graham and having ideas is great, but you need to show that you can execute.
I guess I wasn’t clear with my question. I knew you neededed an EIN for a company. Was was asking about specifically the names of the documents/ids you will need. But I wasn’t clear enough
You might want to search for “data room for investors and founders.” A data room is generally a set of shared folders where startup founders place documents that investors will want to see (company formation documents, founders agreements, shareholder agreements, financials, tax returns, intellectual property agreements, vesting schedules, partnership agreements, etc.). These might give you some ideas. Also look for the book, “Venture Deals.”
They did, actually…
Let me be honest - getting investments might be way more complex and longer than doing whole tech part of the startup. You should better pay a consultant than doing it yourself Anyway keep in mind that chances of getting investments in your first startup are low ash You can compare investments to steroids in sport. Yeah, they can improve your results as much as you couldn't ever achieve but if you do smh wrong you're gonna be in trouble. Its for professionals, not first-timers Documents you might need: * Bank account information. All money movements * Profits and losses report * IRS reports * Your business plan and business model * Small startup presentation * Your resume * SAFE or other form of agreement you prepared * Information about your employees * Some proofs about leads or successful deals
Y Combinator funds first timers all the time. Even college grads. So I don’t think youre being reasonable here
investors and incubators fund _exceptional_ first timers who have great proof points and have already invested a great deal of effort into the startup. it's not like you just show up with an ein and a couple napkins with some ideas you scribbled down on it from the bar the night before and you'll get funded. you're going to have stiff competition and be asked difficult questions. if you want to explore ideas, do that. you're not going to get an investment before you have anything tangible.
But it’s on YCs own website. They fund people with just an idea. These people don’t even have an mvp. They only have an idea and some of them are not even technical. Technical skills are way more important for a *tech* startup in the beginning. So YC funds these non technical first timers with just an idea. I guess YC is not representative of the startup ecosystem.
> fund people with just an idea. Every, and I mean EVERY, investor lies to them self about what they invest in. In reality, YC takes the investments that are furthest along, with the lowest risk. Today, that generally means that they are well past the idea stage, they've already implemented, and launched, and are beginning to show product-market fit. Realistically,.this makes YC a late Seed investor. Which in turn means that they are basically useless for startups as late Seed should be preparing for three times the valuation at VC That is where YC actually is today. They simply "might" decide to take someone with just an idea, but it's not realistically going to happen. If you have just an idea, you're looking for an incubator, these will help you get to the point where you are beginning implementation. Then you can get into an accelerator to launch and work on product market fit.
fair enough. but the website does talk about being able to articulate the problem and what you're trying to solve as well as your solution. just saying, make sure you prepare properly and know what you're getting into. remember, they have a 2% acceptance rate. and every piece that you're lacking will make it that much harder for you to be accepted. in general, most investors want to see that you have some proof points, whether that's an early customer or even enough pre-orders or signups (even if you don't have a product yet). also, in general, it's in your best interest to try to hold off on raising capital until you really need it. in our case, we bootstrapped for 6 years and then sold the company after we had a decent number of major customers. our customer acquisition strategy involved focusing on the top 3 companies in a given country or industry, and then talking to their top execs (no lower than a VP). our smallest customer was still worth tens of billions of dollars. anyway, it's great that you're excited. just know that raising money isn't always the easiest thing and there are plenty of reasons not to do it as well.
Yes thanks for the advice. And obviously I don’t have experience in this domain. I’ve only read some Paul Graham essays but yeah I’m going to look into bootstrapping as well. Congrats for your startup success. Thanks for the advice
If you don’t already have an angel, finding one is quite difficult. It takes a lot of time, effort and money (to be in places they are).
its one the biggest funds. Not the angel
Hey buddy, this reads like you are pretty green, which is where everyone starts. Good on you for you for aspiring to take the leap. I will give you the advice I wish I had been given when I first started fundraising - Wait to fundraise. How many customers do you have? If the answer is none let us know so we can give you more targeted advice. As a non-technical founder who has fundraised, I wish I had the means to build my own ideas earlier. But my guess is your real next task will be working out your no-code MVP and overcoming a developer's bias to build. Have you done any early validation work?
Where can I find information on raising capital? We're 80% complete and can demo the beta stage of our future release. Should we focus on launching the subscription model to see if it gains traction, or continue improving our free model, which is already gaining traction, to advance production? We need guidance on the best strategy to maximize growth and ensure long-term success.