Comment by leandot
10 months ago
Let's dissect this a bit with some assumptions.
If you're asking for $600k and want to do your own thing, then you're not talking 50%-50% split, let's say it's a rather typical 20% VC seed round. This means your company is valued at $3m pre-money valuation. That requires some convincing to do.
Then a typical VC would want to protect their investment and expect high outcomes - otherwise they'd invest in index funds with low risk, which btw grow fine. The typical expectation would be 3x the investment in say 10 years. So they'd be looking for a $9m exit. Also they'd put liquidation preferences, preferred shares, vesting, cliffs, etc., which make sense. The 300k ARR, which is still fictional may give you a value of $1m and this in very good markets. You'll need to make this 300k MRR so that it makes sense to them.
Maybe you can find a partner who puts $300k and you both get a salary and aim for a $300k ARR together. Then the math looks better but is way riskier and harder to pull off.
I have spoken to an investor and a couple folks with business backgrounds. I am willing to give up up to 40% upfront. I put this in my YC app as well.
I think a $9m exit is doable based on the other big players in the space. One has a track record of raising $80m in their last round if crunchbase can be trusted. If they are getting $80m in a B or C round then I think there is enough market space for me to come get 2-10% (which pushes past $10m ARR).
I appreciate the info / perspective from your comment! Thank you!