What signs indicate that a consumer web startup should or should not seek investment?
Bootstrapping a startup should be easier today. Unless a firm is going through the costly process of obtaining enterprise customers or managing production, it should stick to the paradigm of making money from day 1 and only taking investment far down the road for scaling purposes.
Does this always hold true? As an early stage investor, what factors indicate that need for early capital to you?
One clear sign that a consumer web business should seek investment is when there is some indication that the "dogs are eating the dog food" and the product offering is really resonating with base of consumers. This needs to be combined with something special and ideally proprietary (e.g., a unique content, technology, distribution, or product offering). It is really important to understand how the investment will provide the leverage to fuel and improve upon an early model. A clear sign that you do not need to raise money is when there are tests that you can run (without money) to develop some initial proof points for your business.
If the market opportunity that you are addressing is small, building a lifestyle business might work better for you, as it will allow you to own the whole company and to focus on cash-flow for yourself and your partners.
If the market opportunity that you are addressing is small, building a lifestyle business might work better for you, as it will allow you to own the whole company and to focus on cash-flow for yourself and your partners.
