How do you approach fundraising as a solo founder?

Dhruv Bhatia
18 replies
Do you think it is harder to raise capital as a solo founder? What are some things you should keep in mind? Any tips for applying to accelerators etc. as an early-stage solo founder?

Replies

Techie + Serial Entrepreneur
As a rule, yes it's much harder for several reasons. 1. The investors need to see a team as doing all of it yourself, means a single point of failure. 2. If you are a technologist, then who does the marketing and sales? 3. Exit prices are much lower for solopreneurs. In general, in the investment calculations there is a coefficient that multiplies annual revenue, to get the valuation. For teams it is 4x annual, for solopreneurs, it's 2.5x. That basically factors for the solo nature of it. The other way to look at it, is if you get a poor 50:50 co-founder, that adds no value, then you are both getting 2x annual revenue, which for a solopreneur, means they are effectively losing 0.5x annual revenue for themselves, even though they did all the valuable work.
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Founder - Lance for Freelancers
@ethar_alali For your last point - that's exactly why people use reverse vesting.
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Founder, Casa
@ethar_alali Solo founder doesn't mean "doing all of it yourself" though, right? You can hire early team members, give them equity along with a salary. This also answers point 2, the goal is not necessarily to be a solopreneur or to be the only one in the company. Very interesting point about the exit price. However, co-founder conflict is one of the biggest reasons for the death of startups, and in that scenario it won't be 2x/2x but 0 effectively.
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Techie + Serial Entrepreneur
@ethar_alali @dhruv_bhatia Solopreneurs aren't just the founder and this is where one difference between the solopreneur and entrepreneur. As both can end up in the same situation. Entrepreneurs don't have to have partners, but they naturally delegate a lot more, because their focus is typically the exit. Solopreneurs are much more in the weeds and like it there Sure, both delegate, and delegation is fine and of course, you can flip it. However, when I say "team" I mean an executive that are personally well invested and have the ability to execute the idea. I don't mean staff you give minor shares to later. They often won't join you in a pitch :)
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Techie + Serial Entrepreneur
@ethar_alali @gilad_uziely it's one vehicle, sure. Though it has to be well structured, because the nightmare scenario sees the lazy then buy up all the worker's shares at bargain basement prices, THEN actually do the work to sell it. There are other ways, including Convertible Loan Notes, which ensures the worker actually gets something and there is an incentive to get it sold and stop paying the loan.
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CEO, Trakto.io
I would not go fundraising. There's venture debt and other ways to fund your business. Fundraise means partnership. Most investor will look at this as a high risk. One example: you get sick. or you decide not to move forward. puff goes the business.
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Founder, Casa
@pauloblob fair point. There are however quite a few examples of successful solo-founders - https://medium.com/swlh/successf... The biggest one is obviously Jeff Bezos. But yes, agreed that it is high risk.
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Search OnlyFans accounts @OnlySearcher!
I agree with the comments that say its really risky from the investor point of view. Maybe you could check incubators that connect founders and teams. They will help you find a team with the abilities you lack, and they possibly may fund your idea in the future!
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Founder, Casa
@javier_garmart Yes, there certainly are quite a few incubators that promise to help find co-founders.
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Search OnlyFans accounts @OnlySearcher!
@javier_garmart @dhruv_bhatia I think that may be a good option, solo founding is an extremely exhausting experience!
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Humble Founder 😌
It's totally possible, but the scale is different. If you have a business idea that's validated and don't mind growing slowly overtime, then angels sometimes invest in you. But the following is a must. - Get minimum traction and revenue by yourself If you don't really care about becoming a unicorn, it's not impossible.
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Founder, Casa
@david_t_kim totally, focus on the most important metrics as a solo founder. You know what's so interesting? Maybe this can be a blessing in disguise as you get rid of all the bullshit as a solo founder and focus on the absolute most important levers that will make your startup grow
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CEO @ Assemble - www.assemble.tv
I'm a solo founder and have successfully raised 7 figures and was accepted into 500 Startups. I've never seen it as a crutch and to me I approach it as a competitive advantage that enables the company to make decisions and move faster. With that being said, when you have strong early revenue and a clear vision like we did a lot of those concerns around number of founders go out the window. Prove that your business is already working and growing and investors will become much more comfortable with a solopreneur. With that being said, I've recently made some of my top teammates co-founders as well and given them equity stakes, so technically speaking I'm no longer "solo".
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Founder, Casa
@assembletv Very inspiring :), exactly the trajectory I hope I can achieve some day
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The Entrepreneur's Identity Standard.
@assembletv Thank you for sharing your story. Much appreciated.
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