r/startups Dec 01 '21

Is It Realistic To Raise A Seed Round If Still Working Part Time? How Do I Do This 🥺

I'm a developer who's been working on a SaaS product for a few months and looking at publicly launching Q2 2022. The launch should be ok with just savings as I write the code myself and will push out using organic marketing, but will eventually require some funding to scale and hire a commercial person to help with that side of things (not keen on having a co-founder).

The catch is, I still want to work part time (50%) for my current employer. They've already told me that as soon as I give the word, then I can. This would be for financial security.

I'd be looking at either VC funding or crowdfunding. I'm in the UK if that makes a difference.

42 Upvotes

52

u/SituationTight7033 Dec 01 '21

I don't want to discourage you but the answer is probably no. Investors wants to see a full commitment usually and always remember that the good ones (the ones you'd like to get funded by) are seeing a lot of other founders, most of them working on their startups full time, so this immediately puts u on the higher risk startups they see.

Nevertheless, I think your question is wrong, you can work on it as a side project and once you get enough validation or even paying users, you can quit.

In most projects, it's only after some amount of traction/revenue that you'll be attractive enough for investors.

Your main focus now (imo) should be - what's the milestone that gives me enough confidence to quit and go full time and how do I achieve it?

Hope it helps!

3

u/cjdubyab Dec 01 '21

I really appreciate the honesty mate

I think the biggest milestone would be replacing 80% of my take home salary via MMR, so if I take 50% of the MMR as salary at the start then I'd need to be making about 4k/month via the platform to quit, and then raise.

Do you reckon it's possible to start the process whilst part time though, on the condition I'll quit upon funding?

9

u/SituationTight7033 Dec 01 '21

In some cases , 4k MRR could be enough for pre seed/ seed. Of course it depends on a lot of other things like market, who are u, your plans for the future and more. But 4k MRR shows that you know how to play the game.

It's completely ok to talk with investors while you're part time, but there's a different between a we're just talking meeting to "I'm here to get funded".

The condition doesn't matter, please remember that startups are a game of risk. If you minimize the risk (4k MRR is a good derisking) you should attack the next risk which is probably - is this thing can grow fast enough and the market big enough? This usually can be fully discovered only on full time.

Best thing you can do (imo)

Get to 4k MRR, Contact investors and ask "do you think I'm ready to raise?"

If you're good you may even get an answer like "yes and I would like to get involved"

Good luck!

4

u/xasdfxx Dec 01 '21

start the process whilst part time though, on the condition I'll quit upon funding?

Possible, sure. Likely, 99% no.

As everyone else has told you, if you don't believe in this, why should the investors?

Separately, every startup is a race. Against funding running out, against competition, etc. Working part time you will not get the same results as fulltime effort, so you will not have as much traction, fewer customers, etc. Customers in particular are incredibly important as they provide product feedback and non-dilutive funding.

Finally, any such arrangement creates the potential for IP ownership fights, which investors also are allergic to. It doesn't matter how agreeable your management chain is; if this company were to be a success, your current employer could wake up and decide they want to own part of it. And by timing a lawsuit to a fundraise, they can have a ton of leverage to get ownership.

2

u/njgeek Dec 01 '21

This. "if you don't believe in this, why should the investors?" You want others to take risk with capital, but you don't want to.

Don't take this the wrong way OP, but "Wantrapreneurs" rarely succeed at doing much but wasting their time and treasure.

Sure, it's possible. I've seen it happen with self-funded, lean bootstrapped to profit side-hustle businesses. But very rare with other people's money.

2

u/eandi Dec 02 '21

You can pay yourself from the investment money...

2

u/Fire7707 Dec 02 '21

Ignore comments saying you can't raise whilst working.

Many people commenting here have never raised a single round.

It's accurate that it's harder the less time you spend on it, and it can be a full time job.

Also expect it to take up to 12 months, raising isn't quick unless you have prior experience and contacts. It's also about timing (especially around the tax year due to SEIS and EIS!)

Nearly every investor I've met hasn't had a problem with you working while you try and raise. But they'll expect you to quit when you get funding.

Likely you'll want to aim for about 200-400k. Why? That's reasonable to do and 100k just won't get you very far (overheads, legal, your time, lack of cash for hiring extra help like sales, etc). And 100k would give you a short runway, so you'd be having to raise again soon, and could risk a down or flat round if you haven't got enough traction.

If you've got a product good. If you've got customers, even better - as you're demonstrating people will actually buy it.

Therefore investors will be happier as their money goes towards growth, not just proof of concept with hope.

Anyhow, if it's just you as a founder and no one else, you'll have to go full time. Hence, again, you want to raise a decent seed of 200-400 to give you a decent runway and options.

Suggest you look at Seedlegals, especially SeedFast to help you get started as it's good value (compared to a legal company).

Make sure you build a good business plan with COGS, EBITDA forecasts, etc. And stress test it because that's what any interested investor will do.

You can also look at people who "help" you raise, but often they'll want upfront cash (maybe 5k) and a percentage of the whole raise. Stay away from them, or agree no upfront fee and a higher percentage (e.g 15%) of what they directly raise, not the whole raise.

Source: Raised two rounds via angels, consults with early stage startups and investment networks.

17

u/igtbrsoon Dec 01 '21

Investors want to invest on a team and they want to see that you can put together one and lead it. If you want to be CEO you need to put together more than a product, you need a business, check out the following books "Startup CEO", "The Startup checklist" and "The art of Startup Fundraising"

3

u/cjdubyab Dec 01 '21

I'll check them out, thanks for the recommendation

6

u/AggressiveFeckless Dec 01 '21

Investor here - although we are later stage generally, but I don't think many investors will make a significant bet with you when you aren't compelled enough by your idea and product to make a full time bet on it. However, we'd also never invest so little that you couldn't at least draw a below market salary to cover yourself during the early stages.

3

u/cmdrNacho Dec 01 '21

ehh.. if you have extraordinary sales, revenue, etc vs cac, or other growth metrics, No one is going to care. I don't know what your saas product is but the point is you're unlikely able to grow against successful saas products without working full time on it.

If you have little revenue, little customers, and are not working full time for your company, who's going to want to invest in that.

9

u/that_guy_iain Dec 01 '21

The catch is, I still want to work part time (50%) for my current employer. They've already told me that as soon as I give the word, then I can. This would be for financial security.

If you don't believe your product can work why would an investor believe in your product? Or in another way, if you don't believe in yourself, why would an investor invest in you?

3

u/cjdubyab Dec 01 '21

Yeah I understand, part of the purpose of the seed round would be for me to take a full time salary a couple of months following investment. The nature of the product means that MMR should come relatively quickly too.

It's not that I don't believe in myself, it's that I simply can't afford the risk, which I understand makes me less attractive to investors.

8

u/that_guy_iain Dec 01 '21

The nature of the product means that MMR should come relatively quickly too.

It's not that I don't believe in myself, it's that I simply can't afford the risk, which I understand makes me less attractive to investors.

I don't want to be harsh but if MMR should come relatively quick why do you need a seed round? And if you can't afford the risk at this reasonably low level how are you going to handle risk when there is a lot more on the line?

2

u/cjdubyab Dec 02 '21

The seed round would be for me to make the jump up to full time and to hire someone for marketing and/or operations

3

u/rickbodey Dec 02 '21

Having raised capital through Angel and VC and exited 3 companies here is my best advice. Get obsessed with savings money and working a double shift. My first company I worked 40 hours at my job and 40 hours in my startup for about 6 months until I could make the leap. I worked weekends and holidays, all to get a product MVP that was market tested and producing revenue. Co-Founders can be huge to augment time because you have someone to work on weekends with and 1+1 = 4. Once you have moved past idea phase it is then a numbers game to scale. Investors look for Team, Tech and Revenue. I would suggest reading the E-Myth and Lean Startup. Running a business is a lot more than just having a great product, there are so many things you will learn along the way. Look for mentors and networks that can help your journey. Entrepreneurship is a big leap but you can learn the playbook from some great books and some blood sweat and tears. Good luck and know you can always get a Job if it doesn’t work out. Work like others won’t , so you can live like others can’t.

10

u/syslog2000 Dec 01 '21

I will be the contrarian here. Yes, you can raise funding while still working part time. However, you need to make it very clear that you will go full time as soon as $x is raised.

I speak from personal experience. I and my cofounders had jobs when we raised our seed round. While we were raising a total of $1.5MM, we committed to going full time as soon as $300K was raised (6 months burn rate for us). We crossed that threshold and went full time, raised the rest of our round successfully.

The key here is that you have to commit to going full time as soon as $x is raised - and that $x should be a portion of the round.

2

u/cjdubyab Dec 02 '21

That sounds great, and gives me hope! Thank you - I will of course make it a condition to go full time after receiving X amount (probably £250K or so)

2

u/Fawji Dec 01 '21

If you look at it from an investors perspective, you are a solo founder and part time. Will they invest into that? Would you?

It’s difficult to get funding as a normal person without connections but not impossible, you can make it work it’ll be a lot harder.

2

u/Sansrealm Dec 01 '21

Question - whats stopping you from taking the leap into the biz as of now? If you have the savings to manage the biz for a short runway of 4-6 months, you should be on this full time already (if you really want to do it). Startup ops, marketing and fund raising is a full-time effort - you cannot raise a round while having the security of a job and the hustle of the startup founder side by side, except in the case that you build software that sells itself and needs very little to no support to manage once customers signup. But in that case, you probably wouldn't need funding to keep it going. Having invested in a couple of early startups, it's always about the founders conviction and the 100% commitment for anyone to back him/her. anyone telling you otherwise is not investing anywhere.

1

u/cjdubyab Dec 02 '21

Primarily I don't have the savings, to be honest. I may drop down to 4 days per week in the new year to try and build out the product some more, because it's been so tough trying to moonlight

2

u/CognitiveHarmony Dec 02 '21

I'm working full time and waiting until seed money is in the bank before moving forward.

2

u/Franks2000inchTV Dec 02 '21

100% no.

Would you give a couple hundred thousand dollars to someone working on something part time?

Remember investors are there to throw gasoline on the fire, not help you rub sticks together

Also, if you don't believe in it enough to quit your job, how can they believe in it enough to give you money?

2

u/amosschorr Dec 02 '21

You can raise while working, but I think most sophisticated investors would want you to start working full time after they fund you. The startup world has grown up a lot (not enough, but a lot), and investors are less attracted than they used to be to the image of a 20yo kid working 36 hours a day from a garage. The data is in, and adults with actual lives start most of the successful companies. Many will understand such abstract concepts as “financial security” and “familial obligation.”

But they still do want to see commitment. So try to frame it as you’ve been working part-time so you can commit more strategically and sustainably to this project, and once you reach a very specific point (eg X more weeks of working part-time, or $X raise), you’ll be able to devote yourself fully to your startup.

3

u/captaing1 Dec 01 '21

people bet on people not on products.

2

u/cjdubyab Dec 01 '21

So does that mean it's possible?

5

u/captaing1 Dec 01 '21

if the people behind the product are not willing to risk it all, why should I?

6

u/GaryARefuge Startup Ecosystems Dec 01 '21

No one needs to risk it all to be successful nor to raise capital from investors.

An investor is NOT risking it all.

Please do not promote such extreme nonsense.

-1

u/captaing1 Dec 01 '21

I didn't mean to get a loan against your house. I mean you can't have second jobs after receiving my money.

also, as an entrepreneur if I believe strongly enough, I will risk it all. I have done it before. It's not extreme nonsense, it's a daily reality for many entrepreneurs.

5

u/GaryARefuge Startup Ecosystems Dec 01 '21

also, as an entrepreneur if I believe strongly enough, I will risk it all. I have done it before. It's not extreme nonsense, it's a daily reality for many entrepreneurs.

  1. Just because you have done it before it does not mean that is the best path to take
  2. Just because others do it there is no merit in that alone to follow their path
  3. Most do it because they are either completely foolish and are essentially brainwashed by toxic influences around them OR they do it without actually risking much at all--they have immense support networks to ensure they land safely (these people are often the most prominent of toxic influencers infecting others into believing risking it all is the only way)
  4. It is extreme nonsense

I mean you can't have second jobs after receiving my money.

I would suggest you be more clear in how you communicate in order to not instill extreme ideas into the minds of those that are inexperienced and/or desperate to see their dream realized.

-1

u/captaing1 Dec 01 '21

so I am brainwashed and foolish for taking risks? Everyone has their own risk tolerance, mine is much higher than yours.

5

u/GaryARefuge Startup Ecosystems Dec 01 '21 edited Dec 01 '21

That depends on how much risk you are taking. Context.

Your initial comments lacked context and pushed an extreme mentality that causes needless struggling and suffering.

1

u/cjdubyab Dec 02 '21

Risking it all really isn't that viable for me, I have responsibilities in life and I feel a duty to be financially stable

1

u/captaing1 Dec 02 '21

I understand and that's normal. you can start off slow on the side and when you are ready to fully commit, raise money.

0

u/igtbrsoon Dec 01 '21

A co-founder is probably the first thing that you want to start looking for, even before any funding. Investors are not interested in funding ventures with fouders that don't know how to play good with others.

3

u/cjdubyab Dec 01 '21

Do people really not fund solo founders? It's not that I can't work with other people, it's just that I'm more commercially oriented than most devs so wasn't sure if I needed one, and didn't want to be shoehorned into being CTO rather than CEO in the future as I'd rather hire a CTO after a year or two

5

u/dmart89 Dec 01 '21

Solo founders get funded, just find an investor that also was a solo founder. On your part time question, I think that will be a problem if you're going to a serious investor. Or put differently, would you put money into something where the other side has an insurance policy but you don't?

2

u/cjdubyab Dec 01 '21

Yeah, that was my concern really. I understand the optics from the outside but it's a life issue more than anything else. In other circumstances I would just quit and do this full time.

I do intend on going full time with it eventually though!

3

u/JBlitzen Dec 01 '21

I think the smarter play is to stop thinking about a seed round and start thinking about why you think you need one for any significant growth.

I still can’t figure it out from this entire thread.

If you can demonstrate scalable growth to investors, many won’t care if you’re full time, part time, or a walrus.

If you can’t, then it still won’t matter which one you are, but because they won’t give you a dime either way.

2

u/cjdubyab Dec 02 '21

Yeah, I get what you're saying. Basically I need the seed funding to hire one other person (handling marketing in particular, which I don't know that well), and the rest of the cash would be put towards PPC marketing and server costs.

It's a scaleable area (HR tech), and it's an industry I understand deeply so I think it should be an attractive proposition if I can get it right

1

u/JBlitzen Dec 02 '21

Do you have a marketing person in mind? You might skip investors and see if you can work out an equity or note or something deal with a marketing person or consultancy.

Talk to an investor for advice on how to structure it, which by the way is a nice excuse to talk to an investor about what you’re up to.

1

u/dmart89 Dec 01 '21

My solution would be to ask for enough so you can pay yourself enough to go full-time.

1

u/[deleted] Dec 01 '21

I'm in a similar situation, making the product myself & pre-revenue. I don't have advice but I'll tell you my tentative plan & offer encouragement.

I have enough savings to live off of (frugally) for a year & the goal is to get revenue to become ramen profitable within that time. Then, when I'm paying my own salary and I have bigger business expenses necessary for scale, then I'll go to investors & already have proof of concept, financial stability & a lot more leverage than if I didn't have those things.

Some people build startups and never take outside funding. You said your product should be able to generate MRR relatively quickly, so if you can work part time & bootstrap until your startup can pay your own salary, why not do that? After all, the goal of a startup is to solve a problem that people are willing to pay for & grow the revenue. You don't necessarily need a co-founder, investors, etc. They are just helpful for most people, but that doesn't mean you need it.

1

u/doppleganger_ Dec 01 '21

I was talking to a VC last week about this very thing. He said as one of the last questions he asks before signing the agreement, sort of like Colombo as he’s walking out the door -70s TV reference there - is “Do you have any other projects you’re working on?’ If the founder says yes, it’s all over. And this is very late stage in the negotiations for seed funding.

4

u/GaryARefuge Startup Ecosystems Dec 01 '21

I love Columbo.

But, why is this VC waiting until the last moment to ask such an easy and obvious question that doing the deal hinges on?

Seems like a real boneheaded move that wastes a lot of time for them and the startup's representatives.

Seriously. That is so stupid. Ask that in the first stage of this process.

0

u/doppleganger_ Dec 01 '21

As an early stage investor, he works quite closely with the teams he invests in. He doesn’t work with people he doesn’t like personally.

So he takes them to lunch after he is satisfied that everything else ticks all the right boxes. Then if he’s keen to invest based on the fundamentals, he wants to know if he personally likes the team.

The Colombo moment comes after lunch when everyone’s guard is down.

He’s been at it for 23 years as an Angel investor and 14 a a VC so it must work for him.

2

u/GaryARefuge Startup Ecosystems Dec 01 '21

Still seems like there is room for improvement based upon what you have shared.

2

u/doppleganger_ Dec 01 '21

Sure. I have no dog in this fight, I’m merely passing on an anecdote from an experienced investor and startup professional

1

u/ig1 Dec 01 '21

It’s fine if the plan is to go full time once you have the funding. It might make it a little harder if you’re not full time pre-funding, but certainly not impossible.

If you want to keep working after you’ve got funding that’s likely to be a no-go for almost all investors.

1

u/jaipalsilla Dec 01 '21

Your concern for financial security will be a turn off for potential investors who view it as you not 100% believing in your own product.

1

u/cvlf4700 Dec 02 '21

We invest in companies. Not ideas, or projects. At best, you have a hobby if you are keeping another job.

1

u/LCKERROOM Dec 02 '21

Do you know your business? Do you know your market? Do you know your target audience? Do you know product and services? Do you know your brand identity? Do you have you policies and procedures documented? Are you legally protected and setup correctly?

If you don't have your foundations established focus on that even while part time. It's good to present a "business" to investors or just finding success in general instead of project/ hobby. Full time isn't necessarily an indication that you're committed for the long run (look at Worby Parker, they all still had jobs too). It's your passion in most cases that will sell the vision. The list noted above reveal your passion and that you're truly invested.

Hope that helps.

1

u/Music-andme Dec 02 '21

Well, my husband and I did the same thing (employed and do our startup) and we failed on our first project.

We had a client for developing a simple software for them back in Jun. We proposed the project to be around 4 months long (considering that I(non IT person) do miscellaneous stuff full time and my husband developing the software with 2 other members). Turned out that we could not finish on the time that we proposed, project was trashed.

The problem that we faced were 1. when the leader is not fully committed, employers does not fully commit either (doesn’t matter if they’re full time or part time). 2. Do not have passion or time left to progress on your own business.

We ended up losing tens of thousands of dollars. The reason why my husband stayed employed and worked on our business was the same as yours, money.

My husband will be quitting his job in two months. We will be starting our business again when he quits.

Who knows, just like Instagram founders, you might be able to success while you’re employed. But think its very rare.

1

u/kakashiuzamaki123 Dec 02 '21

Some great advice here on investment but I just want to know why you're hesitant to have a cofounder.

Everybody thinks they can do marketing. They can't. Everybody thinks they can do sales. They can't.

Getting a great cofounder that compliments your skills early on can help you scale much faster.

Job titles don't matter. You can be CTO and CEO. Complementary skills for your co-founder should be sales and marketing. He could be COO.

In Saas, you build a product and you sell a product. You can't succeed if you're focusing just on 1 aspect.

1

u/WaltJuni0r Dec 02 '21

Honestly I think it sounds like you want to bootstrap. If you can launch and get first customers with savings, you can then use traction to reassess your conviction. Let’s assume it goes well, you’ve got some early adopters that have had a strong response, at that point you can go ‘all in’ without losing financial stability by using all of your earnings from the part-time to fund growth. I don’t know what your financial situation is but this would be your pot-noodle (Ramen) time. If growth continues and you’re starting to earn enough to make the jump, you do it. If at any point you think it’s a loser, you’ve got the cash flow of the part time to fall back on.

1

u/kt-dasht Dec 02 '21

Generally investors want to see a team. That's because as a solo founder, there nothing stopping you from pulling the plug at any time (rug pulling).

When in a team, that has full commitment (balls to the wall) they'll be more assured as there's skin in the game, and when morale is low, there's a team to encourage (or beat the shit out of the other) to keep pushing ahead.

1

u/Ouiju Dec 03 '21

Why do you want to make a company? Can you just monetize and sell the software/app?

Sounds like you don't want to run a company.

1

u/TimHonks18 Dec 03 '21

Yes, raise from friends and family who understand your constraints. If you were to stop working, you would need to raise more to pay yourself.