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I've pitched to VC's. They tell it's too early stage for them, because we're 4-7 years away from profitability. I've pitched to angels, they want to invest, bu

I've pitched to VC's. They tell it's too early stage for them, because we're 4-7 years away from profitability. I've pitched to angels, they want to invest, but I'm reluctant to take their money as I am not seeing how their money is going to help me get the next round of funding, with the comments from VC's I'm getting right now. Also, the angel network in my country is not big (5-10 people I can raise from). First 250k we got from a big bank. We since then pivoted the company to a more mainstream product and they just killed a proposition like this one of their own (because the product sucked), and are afraid to invest more in the same space.

chatmasta 10y ago
Still wondering what's so capital intensive about the business. Is it the need to float money? Could you restructure your business to avoid this? i.e. by partnering with an existing merchant account provider and signing your customers up as "sub merchants"? (isn't this what stripe does? or at least used to do?) Why not reach out to other big banks for investment? Perhaps you can frame the pitch so that they feel like they're capitalizing on a missed investment opportunity by their competitor (your original investor).
- _funding 10y ago
  One big bank ripped our idea off after having pitched the idea at the same time we did at Bank A (our investor). If we don't close something this month, we'll sell to them (they're rather eager). Making it an acquihire, because they don't know how to take the product to the next level. This outcome would certainly feel like a big failure to me. They are not extremely hard to beat, their product lacks a lot of strategic implementations, making the barrier to exit extremely low. Our product also tends to be better. The reason it's capital intensive is because you'll need to pay for transactions up until about 2020, and also need to acquire users very rapidly before 2018. Only to find out between 2018-2020 how much you can monetize the product. (big risk, fairly unkown reward). There are ways to get the transaction costs down, but they will always be there long before we become profitable.
  - chatmasta 10y ago
    Why aren't you passing transaction costs onto the customer? So all these customers you have are paying you zero dollars?? Is that really necessary?
    - _funding 10y ago
      Yep, consumers are never paying premiums for transaction costs in Europe. Debit cards are the norm here. We don't pay extra when using our regular bank app to transact nor ecommerce transactions. Consumers are not going to pay for transactions :-)
      - chatmasta 10y ago
        Ah I see. I missed the part that you were more Venmo than stripe. I guess this is the same strategy Venmo took (and they started charging fees as soon as possible, especially given all the people using it for credit card churning). Sounds like you have a solid business. Good luck getting more funding. I hope it works out for you.

chatmasta 10y ago

Still wondering what's so capital intensive about the business. Is it the need to float money? Could you restructure your business to avoid this? i.e. by partnering with an existing merchant account provider and signing your customers up as "sub merchants"? (isn't this what stripe does? or at least used to do?) Why not reach out to other big banks for investment? Perhaps you can frame the pitch so that they feel like they're capitalizing on a missed investment opportunity by their competitor (your original investor).

_funding 10y ago
One big bank ripped our idea off after having pitched the idea at the same time we did at Bank A (our investor). If we don't close something this month, we'll sell to them (they're rather eager). Making it an acquihire, because they don't know how to take the product to the next level. This outcome would certainly feel like a big failure to me. They are not extremely hard to beat, their product lacks a lot of strategic implementations, making the barrier to exit extremely low. Our product also tends to be better. The reason it's capital intensive is because you'll need to pay for transactions up until about 2020, and also need to acquire users very rapidly before 2018. Only to find out between 2018-2020 how much you can monetize the product. (big risk, fairly unkown reward). There are ways to get the transaction costs down, but they will always be there long before we become profitable.
- chatmasta 10y ago
  Why aren't you passing transaction costs onto the customer? So all these customers you have are paying you zero dollars?? Is that really necessary?
  - _funding 10y ago
    Yep, consumers are never paying premiums for transaction costs in Europe. Debit cards are the norm here. We don't pay extra when using our regular bank app to transact nor ecommerce transactions. Consumers are not going to pay for transactions :-)
    - chatmasta 10y ago
      Ah I see. I missed the part that you were more Venmo than stripe. I guess this is the same strategy Venmo took (and they started charging fees as soon as possible, especially given all the people using it for credit card churning). Sounds like you have a solid business. Good luck getting more funding. I hope it works out for you.