A software founder with 30 beta apps and a full-time job wants to hire a CEO to raise capital. Instead, find an equity partner who earns in through milestones, not a large upfront stake. Focus one app on revenue first, then raise money when you have traction to avoid a terrible valuation.
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Hi, I'm Evan Carmichael. Welcome to another edition of Ask Evan. In today's episode, I'm going to answer a question from one of my readers, Eric, who runs a software company. He's got 30 different applications that are all in kind of beta mode, haven't really launched yet, and he's looking for a CEO to come in and help him run the company. Wondered if a CEO would buy in and that'd be a good way to raise capital. He's still working at a full-time job and is, you know, has a trouble that a lot of entrepreneurs go through where they need money to run the business, but they don't have enough money coming in from the business to kind of keep it going. So looking for ways to raise capital and also looking at how to get these companies, his software company, off the ground. So to give you some advice, Eric, First of all, it's very rare that CEOs will buy in, especially at kind of really early stage. You can get a CEO to come in and join the company, but unless you're making sales, it's hard for them to give you money upfront. If you were, you know, full-time in this business and you already had some traction, you're already making sales, and there's a valuation on the business, it's a lot easier to convince somebody to put money in. At this stage, if you're not even in the business full-time, it's hard to convince somebody to put money in and join the company. Full-time to pay you a salary. So you have to get the business a little bit further ahead if you want someone to put money into the company and join as CEO. So what I would suggest for you is if you don't have the skill sets to be the CEO and be the business development guy, then you can find somebody who can join you in that role, but they probably wouldn't buy in, but they could join as an equity partner in the company and make them earn into the business. So when I had my first software company, I wasn't the founder. I joined a couple years after the company was started, but I became an owner in the business. We were one of 3 owners, and I joined as business development guy. So I was out doing media, establishing partnership relationships, getting distribution channels set up. That was my role. So I believed in the company. They already had a little bit of a track record. So I joined and I became, you know, a chief operating officer and one of the equity owners in the business. I didn't buy into the business, so it wasn't a cash outlay at the beginning, but it was my time invested to, you know, help make that company grow. So you can still make that work. You have to find the right person, obviously. I try to make them earn in, so you want to be very careful with money that, you know, equity that you give up in your company. It's like getting married when you get partners in your business. So you want to make sure that there's milestones that are put in there so they don't just earn whatever you're thinking of giving up, 25%, 30%, 50%, you don't just give it to them right off the bat. They have to prove themselves. So it could be, you know, make an X number of sales or whatever you want them to do as part of their job description. Make them earn in, make sure they earn your trust, make sure it's something you can work with for a long period of time. And that could be an option for you to go. If you're really struggling on the money side, you have two options. One is keep going part-time and focus on one of the things that really will help grow your business. So you said you had 30 applications. What's the one that's closest to actually being able to make some cash? Right? The cash flow, you gotta get it coming in if you want to be able to spend more time with your business. There's nothing wrong with doing it part-time, it just takes longer. A lot of businesses are started part-time, moonlighting, until you get to the point where you can afford to spend more time on it. It's a great way to be able to build a business. It's not the sexy way, but it's a great way to be able to build your business. But I would focus your efforts on, instead of 30 programs, pick one that you think you can get some money in quickly with and build that one up. The second option is to go out and raise capital, and it could be from an investor. You're looking probably at an angel investor at this stage. The challenge here is if you're not in it full-time, it's going to be hard to convince an investor to give you money for it. And if you're pre-sales or you just have a little bit of sales, you're gonna get killed on the valuation. So you might get the money you need, but you might give up a huge chunk of your company, where if you let it wait a little bit longer and you had more momentum and more sales and more revenue coming in, you could get a much better valuation. So Eric, I hope that helps. A lot of information. I would still go out and try to find somebody if you don't think you have the skills to help you run the business. Make sure that they do earn in, and there's nothing wrong with keep going part-time. Just focus on getting the software You know, the one program out there that will help generate some revenue for your business so you can afford to leave your job and run your business on a full-time basis. And if you really need to, go out and raise capital, but maybe make it in small chunks so you're not giving up too much of the business. I hope that helps. Uh, let me know what you guys think. If you wanna leave a comment underneath the video, love to hear what your experience has been, or if you have other questions or some advice for Eric as well. And if you like the video, please give it a thumbs up. I always appreciate seeing those come in. It makes me wanna do more of these videos. So thank you, and we'll see you on the next episode.
