How do we vet this Pre seed funding offer?

by ColdPreference. Posted on Sep 15, 2020    1    7


I am 1 of the 4 total cofounders at a company that has a mix of SAAS and services revenue. We are trying to grow the SAAS and taper off the services. Ideally we want to spend the rest of this year doing a seed round. In the mean time, an offer has been made for a y safe convertible note for $50,000 at a pre-revenue cap of $1.5M. Some additional context for that number is we are .5M ARR with about 20% of that from SAAS. We do not need this money to make it through the end of the year. We would use it to make a few hires now instead of Q1 2021 with the seed round funds. The offer would also come with some coaching and help for the seed round process, which this VC wants to also be a part of. Would you take this offer with the context I have provided? I feel like we need to avoid the money and the 3.25% dilution while preserving the relationship with the vc making the offer.


Comments

matriosk 1

Am I getting it wrong or you are pricing your company at just 3x revenue?

  ColdPreference 1

We did not set the price, that is the cap they offered, and the crux of the question in some ways.

matriosk 3

Especially if you’re growing pretty fast you are just being too generous, you could get more money or sell less equity

Timnolet 2

You have effectively $100k ARR in SaaS. That shows traction. IMHO raising $50k makes no sense. Come up with a plan on how to deploy $1M. Depending on your team, product and market raising that should be doable. Prepare to answer questions on how your SaaS is not just a nice “extra” for your services customers.

hey_ross 3

Hi - I’m an angel investor and board member for several startups in Seattle. A couple of suggestions:

  1. If you are going to raise money, do a round and shop the deal with multiple investment firms/angels and VCs. One data point is a bad way to get a fair valuation.

  2. At 100k arr for the SaaS side, the valuation seems right; services businesses that are small are worth 1x revenue at best because the value is tied to the people.

  3. $50k seems really low, your taking on an investor who is going to want to tell you suggestions - make sure that $50k is worth that hassle
[deleted] 1

[removed]

GaryARefuge 1

Rule 2