Start-Up Investment
I read about a relatively new apartment search site in the Washington Post Start-Up section yesterday. I'm not going to mention the name of the company, as I don't want to help them with their search engine rankings. I'll write more about my analysis of what they're doing in the next couple days, but today I'm writing about a tangent of what I read. The article states that this company secured some initial start-up capital and is looking to raise an additional $500k. This has been something that's been on my mind over the past several months. Should I be seeking some sort of start-up investment?

In the short term, it would be great. For one, I could stop investing all of my revenue back into the company and begin to pay myself. I could kick start my site in new regions by buying a bunch of advertising, and maybe get some professional creative help. I could schmooze clients. I could bring on more people to help shoulder more of the work. I'd probably even feel more important. Though, in the longer term, a bunch of extra funding would only make a miniscule difference.

Maybe I'm jaded because of what I saw while consulting a few well funded start-ups during the dot-com boom. That kind of huge money is of course much harder to come by, and now a business needs to actually have some kind of revenue model. But it still doesn't appear too difficult for a business with a weak model to bring in $500k - 1Mil in funding. The way I see it, if my expenses are fairly low, then why give up a huge chunk of ownership for little, if any, long-term gain? An apartment search site with free listings isn't going to make millions each year. So an investor would have to take huge piece of the ownership pie to make the ROI worth it. Plus I'd hate to divert my time and energy from growing the business organically to finding an investor.

Now if someone came to me and offered to make an investment, and had a specific plan on how that funding would increase the value of the company, I'd be willing to listen. If their investment made more money for both the investor and myself in the long-term, that would make sense.
- posted by Drew @ 3:58 PM