Ask HN: Bootstrapping. An angel begs to invest 100K. Should I accept?
I am bootstrapping a startup. I can grow organically (but slowly) with my own savings/revenue. I met an angel investor yesterday in a dinner. I told him about my startup and he asked (almost begged) if he can invest $100K (we have not talked about %'s yet). As I was not looking for external funding, this came by surprise.
The angel doesn't have experience in the field of my startup but he is well connected.
Would you take the money? Is there anything inherently good about being bootstrapped apart from the story?
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Personally speaking? Much like getting a surprise offer of marriage from a person on the street probably shouldn't change one's immediate plans, a surprise offer of investment probably shouldn't change one's immediate plans. Do you have a good handle on what changes in your life/business with $100k in your pocket? Is that a positive change? If you don't have good answers to both questions, table the offer for now.
You were going to execute on the startup. So, execute on the startup. Suppose you decide "Yeah, come to think of it, taking investment (and everything that goes with that) really makes sense for you, then you will probably find it still available in the future, from this guy or somebody else. It is unlikely you're going to get worse terms three months or six months from now, when you've added N more quanta of value.
What would you use the money for? What does the angel investor expect from you in return for the money?
Without answers to those two questions, it's really hard for anyone to decide whether it's a good decision or not. There are always strings and charitable people always get something out of their charity, regardless of whether it's simply good feelings (I'm a good person, I helped someone, my money is going to a good cause) or something material (I'm going to control some of this company).
If you feel like you can use his connections, perhaps you could tell him that you don't feel comfortable accepting money at this point, but it would really help if he could connect you with some people.
Essentially, I'm seconding what Michael Dorfman said.
Is there anything inherently good about being bootstrapped apart from the story?
Well, the first point is obvious - should you eventually sell it, your ownership will be higher if you haven't taken outside investment.
Depending on how the money is raised (convertible debt? purchasing common stock? purchasing preferred stock?), your investor will also have a variety of rights relating to the control of the business, which can potentially constrain you down the road.
Taking $100K in convertible debt is a lot easier to stomach than taking $100K and issuing a bunch of preferred stock for it.
I would keep the door open and figure out what possibilities such a change in your plans would bring.
If after careful consideration (no need to be in a hurry here if this offer is good it will still be good three months from now) you think that on balance you're going to be better off by taking this guy on board and you have an idea of how much your company is worth then you can start to negotiate a percentage.
Be prepared to walk at any stage, it's apparently a sellers market so you can afford to play it pretty hard.
if you take the money, i think it's uber-important to specify what kind of role he will hold. once you take the money, he will expect some sort of say when it comes to the direction of the company.
if he doesn't know your industry, you may receive a lot of "advice" that's not worth implementing.
building on some of the other comments, figure out exactly what you would spend the money on. don't work backwards from 100k...work from zero --> up. no need to force yourself to reach 100k in spending if you don't need to.