Have raised $400K, now time for $2 million.

trickygoodstrickygoods subscriber Posts: 1
edited January 2008 in Growth Funding
Our rapidly growing business has raised $400K from friends and family. As it approaches profitability, the next phase would be optimized if we were to raise $2 million. We are 3 years old, and are currently patent pending status, with the possibility of a patent being approved in a few months. Our product is original and is sold online, in our own stores, and distributed to other retailers on the West coast. Okay, so much for the background.
Question, while we need only $300K now, and the balance over the next 24 mos., it seems to me it would be easier and more economical with respect to time and energy to go after the full amount now (ie $2M). Is there a way to structure an investment that is staged based on performance, at a rising (and scheduled) valuation? For instance, take $300K now at $4M valuation, and the subsequent amounts at higher valuations?
Just a thought. The fundraising process is so time consuming - I guess I`m looking for a short cut.
Thanks for any help!

Comments

  • robertjrobertj Tampa Bay, Floridasubscriber Posts: 0 Member
    It is possible to structure a deal so that each "tranche" is effectively based upon a higher valuation. Just a word of caution - I`ve seen several of those deals be pretty one-sided because the company is committed to sell at a given price but the funds are "not available" when needed. 
  • robertjrobertj Tampa Bay, Floridasubscriber Posts: 0 Member
    liss007,
    There are a number of ways to bring capital into a business. Your product is needed, so I`m sure with preparation, practice and persistence - you will be successful.
  • MalteMalte subscriber Posts: 4
    Hi Liss007,
    If your product is really needed, and you on top of that have received recommendations from companies or investors that chose not to fund you, there must be something they didn`t like about the project.
    If we say that your idea (the core idea of your future business) isn`t the problem it could be several other factors. Maybe the budget isn`t too good? Maybe the chances of an investor getting a good return on investment aren`t too good? Or maybe the way you presented the idea (your business plan) was not satisfying for the potential investors?
    Remember that you are trying to sell a product, but most investors do invest to make more money than they invest.
    Let me know if you need any specific help, and good luck
    Malte
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