1. I am the 100% owner of company X, several others are involved, but not full time. 2. X has generated $100K revenue in FY1 and is $60K since new fiscal 7/1. 3. I have not paid myself a dime yet, because I can afford to live off savings and business needs the revenue for R&D, marketing, etc. 4. X is the recent winner of a major CA-based business plan competition - $100K prize. 5. VCs are sold on the pitch -- product, team, competition, IP, everything. They like it.
The problem is this: Even with a $4.4B one-time revenue and $1.6B recurring annual revenue market, they think the opportunity is too small. Due to the revenue X is generating, capital needs are much smaller because each customer added means substantial revenue. However, the market is not as small!
To quote one VC: "If we put $1M in and we realize a fantastic return of 20x, that's still a small bet for us. We chase bigger opportunities".
So I'm thinking angels are a good idea, but the angel groups seem too process-oriented: several months to get considered, lots of structure, very few deals invested in and usually not over $500K. Further, I'm hearing that Silicon Valley based angel groups are highly biased towards local investments -- X is run out of Los Angeles.
My quandary is: how do I raise a smaller amount of capital from smaller funds or angels, at a fair valuation given current traction, without a lot of network to start with?
I've gotten introductions through the competition we won and VCs, but things haven't panned out substantially yet. Disclaimer: I've only been at it for a few weeks and lots of avenues still cooking, but I'm just looking for YC advice on fundraising related to smaller capital needs.
Any comments ?
