Rising capital or partnership?

[andrea]

Hello,

I'd love having your opinion.

Part of my entrepreneurial idea is in realizing a web portal.
It's a rather complex web portal (from the programming point of view) and then I can't realize it by myself.

It seems to me that I have two options:

1. getting funding in order to hire a team of expert programmers to develop the portal;
2. realizing a partnership with a softwre development firm (we share future revenues).

Every option is not an easy task. It's difficult getting funding and finding a development partner it's not easy as well.

Anyway, I'd prefer the second option. But friends told me that it's very dificult that a sw development firm could be available for a partnership: it would prefer developing the software and charging for that work more than sharing future revenues (it's a risk for them).

Yes, of course it all depens on the kind of the entrepreneurial idea, but in general what do you think about it?

Thank you very much!

[thef0x]

Originally Posted by andrea

Hello,

I'd love having your opinion.

Part of my entrepreneurial idea is in realizing a web portal.
It's a rather complex web portal (from the programming point of view) and then I can't realize it by myself.

It seems to me that I have two options:

1. getting funding in order to hire a team of expert programmers to develop the portal;
2. realizing a partnership with a softwre development firm (we share future revenues).

Every option is not an easy task. It's difficult getting funding and finding a development partner it's not easy as well.

Anyway, I'd prefer the second option. But friends told me that it's very dificult that a sw development firm could be available for a partnership: it would prefer developing the software and charging for that work more than sharing future revenues (it's a risk for them).

Yes, of course it all depens on the kind of the entrepreneurial idea, but in general what do you think about it?

Thank you very much!

I think you don't know what you're talking about.

So I suggest you read some books on basic business and investing.

My first comment was made because you didn't actually say what your product was. I could say, "I'm going to make communication software that interacts with vessels all over the world in order to specify and divide different sectors of communication".

That means nothing. I just made that up. A virtual portal.. Where? To what? What does it do? Who will make it? Is it possible? How much will it cost?

You need these questions answered before you think about funding or investing.

[TheColonel]

Andrea, it's tough to give you advice when you give almost no details.

[Vanessa]

Andrea... you are going to have to do a lot of ground work to get your idea into a business.

Before you can bring anyone on board as a partner or as an investor you are going to need to write out a business plan complete with financial projects, a marketing strategy and timeframe from concept to launch. Your web portal has to fulfill a need in simple, clearly defined words that can generate revenue from an identified market.

I don't need to know the specifics of what you want to do to know that you don't have a plan that an investor would give you their money to make happen. Investors look at over a hundred plans before they seriously consider one. Investors get to pick the best of the best start up plans and you can only get into that game if you play by their rules and expectations. Along with investment capital you will be expected to put as much of your time, money and contribution towards the company and give up equity. Your idea is a huge risk to an investor --or partner who would do the work with you. As an owner of a web development shop I get approached all the time by people with ideas but no plan to actually create a business and generate revenue. From that perspective why would I take the risk?

Ideas are cheap, execution is gold.

Also there are levels of investment capital, most investors are going to want to know a solid number that you can explain cold through your plan and have complete confidence the people in the company can deliver on the projections. If you develop your plan and find that you need 10-50k to develop your concept, you are better off looking to the three F's (Friends, Family and Fools) for capital. Those are the people who will invest in you as a person to develop your idea.

Also, the development may be something you put in as your sweat equity so that you can bring in partners or investors later on after you've reached a milestone such as protoype (risky) or better yet commercialization (less risky). And by that point you may have developed the company and realize you can self-finance. Which is honestly my favorite way of building a company. I have a Masters in Entrepreneurship and find that the best businesses for me are the ones I am fully vested in, have throughouly planned to control and mitigate risk and self financed through initial phases.

[ahimel]

Yeah, Andrea... how come you didn't post all the details of your brilliant idea into a public forum of people with more money, technical skill, and business experience than you have? Tell me enough that my software engineer can make one!

Anyway, as Vanessa says, step one is a business plan. Either a software developer or a venture capitalist is going to much more enthusiastic if you can say, "I want this much money, and I will use it in this way. This will allow me to take these steps, on this time frame, which is reasonable and adequate because I've checked it against this. Those steps will have these results, so that in this many years, my company will be worth this much. At this point, I would be happy to cash you out for a really big number, giving you a return of such-and-such, or to renegotiate a profit-sharing plan, giving you an ongoing annual return of so-and-so." They're not so hot on, "Give me $100,000 and I'll give you back a million. When? Um.. soon. I promise."

Step two is an NDA (Non-Disclosure Agreement). This allows you to take your plan to various software developers and venture capitalists and discuss the possibility of them working with you, while minimizing the risk of them just taking your idea and running with it.

Step three is to research software developers and venture capitalists. Select some that you think you'd like to work with, and you think would be open to you. Determine what they do, what sorts of developers they work with, what kind of deals they generally make, if the people who are currently working with them are happy with them....

Step four is to go talk to them. See who's really interested. See who would make you the best deal. Decide from there whether you'd generally rather do a partnership, but this particular venture capitalist is willing to make you such a good deal that you'll have to go with raising capital.

Also, I would consider in step 3 two other possible options. One is to sell your business plan to a software development company. You won't get as much for that as for the finished product, but the market research and fully-developed plan should be worth a few thousand. The other option I see is to find a few other programmers with whom you can partner, rather than a full software development firm. This saves you up-front cost of hiring them, but does mean your profit gets split in more directions when you get it.

Just my thoughts.

[Brutha]

Two questions:
1. What are your own credentials? Have you already developed Web applications before?
2. How many programmers do you need?

[andrea]

Thanks for the feedback.

Vanessa, Ahimel:
thanks for your very useful reply!
Yes, we (me and my partner) have to do a lot of grounding work before bringing anyone on board. We’ve been working on the concept, and many further steps needs to be done. But we are also thinking of the various options we are going to choose from in the future, trying to learn from general guidelines and advices of skilled people (in this context, I’ve been reading a nice book “The Art of the Start”, by Guy Kawasaki. If someone can be interested, here is a great list of books to choose from).
You wrote useful advices and options also about my question. It was exactly what I was looking for -- By the way, Ahimel I didn’t think before of the two further options in your Step 3: thanks!

Brutha: I don’t think to be part of the programming team in the development phase, and the number of programmers depends on some factors we have not decided yet in this phase.

Thank you and greetings to all the other forum people.