This is very informative, kudos to you guys for sharing. How did you guys set your goals as far as how much to raise and the amount of equity you were willing to give up? What did having the extra investment mean for you guys starting out?
Honestly the determiniation of how much to raise was pretty back of the envelope. I think originally we thought about doing $250K but then after talking to other people it seemed that's a pretty naive number. You really can't get much done for $250K and plus if any investors are interested they'll bring in your friends and you'll end up raising $600-800 anyways (this happened to the Weeblies if I recall).
I won't get into valuation or equity given up but I always say that difference between $0 in the bank (or whatever you can relunctantly squeeze out of family members) and ~$1M is a tangible difference in your ability to survive and succeed. It's like you hear about YC and their equity cut. If what you give up is easily surpassed by the speed at which you can now move then it's worth it. If you can't take a million dollars (when you have 0) and improve your outcome by more than your dilution then you shouldn't take the money.
In the article you say, "...we also took the initiative to set our own valuation. Investors were very value-conscious in those days. It's not just enough to be a solid opportunity, you also need to be a good value. We set a price we thought was fair and wouldn't generate a lot of push back."
Don't need to disclose the actual number but how did you determine what was a "fair" valuation. Was it a discount to prevailing valuations? Did all investors buy in at the same valuation or were the terms more generous for the first investors?
We just sat down and picked an amount of valuation (or really dilution) that we were comfortable with and went with it. Everyone was at the same valuation. There was no discount for first movers.
I'm finding you can get a heck of a lot done with << $10k. Even << $1k. Yes you do need to grow the right way, and pick the right space, with the right people (or person, singular). But it can be done. If anyone reading this has a spare $50k sitting around and can't do anything with it just send it to me and you'll see just how far it can stretch.
