Evan Carmichael answers how to raise $15,000-$20,000 for a social networking startup. Angel investors won't touch that amount, and they'll avoid the project entirely if you outsource all development. Find a technical co-founder who can build a prototype in-house instead.
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Hi, I'm Evan Carmichael. Welcome to another edition of #AskEvan. In today's episode, I'm going to answer a question from one of my newsletter readers, Anna, who is trying to raise $15,000 to $20,000 to create a new social networking type of website and go after investors and wanted my advice on how to do it. So Anna, thanks for the question. I think for you, that's a tough amount of money to raise. If you're looking only at $15,000 to $20,000, you're not really getting a serious investor involved. You're not getting somebody who has a lot of experience usually. A lot of the angel guys, that would be too low an amount for them. You might get somebody like a dentist or a doctor to come in and they have extra cash and would want to invest, but they may not have a lot of experience. Part of bringing money in is you don't want just money, you want somebody who can help you and give you connections, right? They're gonna be part of your ownership team, they have equity in your business, so you want them to give you more than just money. You want them to be a helpful resource for you. So you definitely want to qualify your investors, but it may be too little an amount to go after a serious investor. The next thing is a lot of people want to start social media sites. So, you know, this is gonna be a negative hurdle for you to have to overcome. There's a stigma that a lot of the social media sites have already been created And for, you know, new products or services, it's encouraged to build around the existing social media sites instead of trying to build your own new one from scratch. So there are still some examples of one that have, that have hit it big, but there's a negative bias that you're gonna have to overcome and really show how you're different and what's so unique about you and why you're gonna make it where all these other, you know, startup social media sites have failed. I think a more important issue is You're raising money to bring on a team to help you build this website. So some company that you've hired to— they've quoted you for the website and you're gonna pay them to do it. It's really hard, and from an investor's point of view— so I used to be a venture capitalist— we wouldn't touch a business like this because you don't have the technology team in-house. So for an investor, they want to see at some point that you're gonna be able to exit from your business. You're gonna be able to pay them their money back. So either you're gonna go public, or you're gonna get acquired, or it's gonna be some kind of management buyout. And they look at what kind of technology do you have in-house. And it's really hard to run a business without having somebody on the technology side in-house, right? Everything is exported to, you know, overseas or some other company, even if they're local. You don't have the experience in-house, and it's really hard to grow business that way and really hard to raise money for that type of business. So what I would encourage you to do is try to find a partner who really understands the technology side of things, can build it without having to give up capital, without having to raise capital and bring on an angel investor. Try to find a partner who is committed to it and work around that. If you're able to build up a prototype and get it going and get some momentum with it, then it will be a lot easier to raise money because you have somebody in-house, you have core competencies, you have intellectual property, and you don't have to keep paying outside companies to finance your development. So I hope that helps. Maybe not the news you wanted to hear, but those are my thoughts. If you guys like the video, please give it a thumbs up below. It makes me want to make more of these videos for you guys. And I'd love to hear what you have to think. If you have some comments, leave it below in the comments, or if you have a question as well, you can leave it in the comments below. And we'll see you on the next episode.
