Financing and Web Apps

Just spent some time with a young first time entrepreneur *full* of potential. He’s talking to VCs trying to get financing to build his idea. It’s a web app, so here’s the deal. IF you are building a web app DO NOT GO TO VCs…at least for a while. First you need to:

1) Build the app and release it live
2) Get some users
3) Interview and understand those users intimately

After you have done these three things, maybe you have a case to speak to a VC about what you are up to. Different rules apply to serial entrepreneurs who have established credibility to stand on, but first-time entrepreneurs need to prove themselves – keep in mind VCs are being flooded with business plans for websites…they are a dime a dozen like it’s 1999. And if it makes you feel any better, no one believed in FreshBooks when we started talking to people about financing in 2004…so don’t let the bastards grind you down.

4 thoughts on “Financing and Web Apps

  1. Hi,

    I going thru the same problems (VCs) and your advise helpded me to take a final decision, not to go to VCs. I developped a Web app for telecommunication and hydro…with user freindly interface to configure business rules to apply to any industry field and it’s very diffucult to find a penny to get this thing installed on a web server…any suggestion will be appricated.



  2. I agree – VCs for first time entrepreneurs are probably a very bad idea. But sometimes, you need a little start up capital to get things off the ground. In those cases, look for Angel Investors, who you know and can work with so that you can get going.

    This doesn’t replace the hard work in getting to know your users, and building out the app – but sometimes you need to build the right team around an idea, and to do so you need to lure them away from their 9-to-5s.

    Great advice though, keep ’em coming!

    – Eric Marden

  3. […] Yesterday I spoke with an entrepreneur who is living those kind of days himself. He is seeking financing for his web app. In speaking with him I was reminded of those days…So many ideas, so many directions we could take things and so many directions things could go. I still feel this way, but I’ve learned some lessons that make the ride smoother. […]

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