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Introduction

In the previous post, I announced a three part series about financing a business. Meanwhile, I figured out that it might be too long, I wish I could explain everything in just one paragraph, but like with most legal stuff, it's not that simple.
However, if you're starting a business, it's important to know the basics of venture financing. So, I've linked several articles below for more details on different types of financing and the key terms you should know about.

Today we’ll discuss:

• Bootstrappers’ way to money

• Product/market fit

• SaaS Marketplaces

• Resources to dive deep into financing

💰 Bootstrappers way to money

You know what I hate the most? Coders who believe that they possess some sort of magical ability that no one else can acquire. I also dislike SaaS founders who still haven't realized that they're business owners and not just programmers. Money equals business, and no investor will give you more money simply because you can write neat code. They require someone who can operate a company and generate revenue!

How Bootstrappers can find funding ?

…Networking

Based on Jewel Burks Solomon, who sold her company to Amazon, this should be your networking-for-funding action plan:

1. Use your connections: As an entrepreneur, it's important to find someone who can help connect you with people who can support your business. This could be someone you already know, or someone you meet at events and classes. For example, Burks Solomon reached out to her contacts at Georgia Tech to find experts who could help with her business idea.

2. Get investors interested indirectly: If you know someone who knows an investor, ask them to introduce you. This can help create buzz about your business and attract more investors. Because investors and VCs gossip a lot !

3. Ensure your business is accurately positioned: It's crucial to present your business in a way that highlights its unique strengths. For instance, if your company has cutting-edge technology, consider publishing whitepapers and attending conferences.

4. Build relationships with potential buyers: Get to know people who might be interested in buying your business. This way, if you do get an offer, you'll have more options.

5. Talk to other entrepreneurs: Don't forget to seek advice from other entrepreneurs who have been through the process before. You will learn selling techniques, negotiation tactics and maybe a bit about the mindset of the investor. SaaS founders should gossip too about investors, at least this is what YC is telling their startups to do.

6. Know your non-negotiable: Before you go into any negotiation, decide on three things that you won't budge on. This will help you evaluate potential offers and make it clear to the investor that you are persistent.

7. Don't sell too soon: It can be tempting to sell your business right away, but don't rush into it. You have leverage and should negotiate for the best deal possible. “The fact that you’re having the conversation means you have leverage.”  

…But investors also need persuading before investing. Usually a product they can see, use, or touch will not be enough. They will want to know that there is product/market fit and that the product is experiencing actual growth. So what’s a product/market fit ? and why is it so important to investors ?

📦 Product/Market fit

Oussema Mzoughi @meMzoughi

Product/Market fit : "The market should pull the product out of the startup, rather than the startup trying to push a product onto the market." - Paul Graham

11:12 AM ∙ Mar 18, 2023

The three fundamental components of a startup, namely team, product, and market, exhibit a significantly broad range of variation in terms of their caliber and quality.
What leads to success? And, as individuals who study the reasons behind startup collapse, which poses the greatest risk: an ineffective team, an inferior product, or a poor market?

“MARKET”

In a good market, where there are many people who really want to buy something, the market itself helps to sell the startup's product. Conversely, in a terrible market, even if the startup has the best product and team, they will fail because there aren't enough people who want to buy what they're selling.

The #1 company-killer is lack of market.

• When a great team meets a lousy market, market wins.

• When a lousy team meets a great market, market wins.

• When a great team meets a great market, something special happens.

As a startup founder, what should you do about all this?

The only thing that matters is getting to product/market fit. When you're still trying to figure out what your customers want, your main focus should be on finding the right product for the market. You should be willing to do whatever it takes to achieve this, such as changing your team, modifying your product, exploring a different market, and sometimes saying no to customers. Once you reach the right product/market fit, you'll know it because customers will be buying your product rapidly, and your business will be flourishing. You'll need to hire more people to handle the growing demand, and even reporters will want to interview you about your success.

Michael Seibel explains product/market fit using a “problem”:

If your friend was standing next to you and their hair was on fire, that fire would be the only thing they really cared about in this world. It wouldn’t matter if they were hungry, just suffered a bad breakup, or were running late to a meeting—they’d prioritize putting the fire out. If you handed them a hose—the perfect product/solution—they would put the fire out immediately and go on their way. If you handed them a brick they would still grab it and try to hit themselves on the head to put out the fire. You need to find problems so dire that users are willing try half-baked, v1, imperfect solutions.

🏛️ SaaS marketplaces

As a bootstrapper, your goal should be money. It’s your only self-evaluation. But to ask for money, you should first know your worth. This is how you do it :

• Try to sell as soon as possible (do not really sell but act like it). Follow what others are doing and how much are they selling for. Connect with them and connect with other investors. Acquire states that 80% of its users fail to close deals. Theoretically, evaluate your business and see how much competitors are selling for.

• Learning exits and selling techniques can help valuate your business and knowing how to raise money, these are the selling platforms:

  • Flippa provides a safe and easy-to-use platform for buying and selling businesses with reputation scores, mobile apps, live stats, and 24/7 customer support.

  • Empire Flippers is a mobile-friendly platform that offers a variety of micro SaaS businesses and affordable services to facilitate the buying and selling process.

  • Microacquire allows businesses to quickly and easily find software solutions with always-free listings, high-quality curated products, and anonymous information sharing.

  • Quietlight is a specialized marketplace that provides expert evaluation, support teams, state-of-the-art technology, and rich analytics for buyers looking for the best products.

  • Sideprojectors is a unique marketplace for buying and selling customizable side projects and software products.

  • Indiemaker.co is a community of over 16k members that offers a fast and easy setup with no hidden costs or monthly fees for makers to sell their side projects, unused domains, SaaS, social media accounts, and online businesses.

  • Transferslot is a leading micro SaaS marketplace with an extensive vetting process, expert support, and affordable pricing options to help businesses find the software solutions they need.

  • Motioninvest Premier micro SaaS marketplace with expert vetting and support teams, free professional site valuation, and a 15-20% success fee.

  • Acquirebase Platform for buying or selling software businesses with expert guidance, vetting, marketing services, and a free listing option or premium yearly/lifetime plans.

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Bonus:

As I couldn't cover all the details in our last article about financing options, I've compiled the most important information here to help you understand the differences between Seed, Series A and B, as well as VC's and angel investors.
Note: Venture financing is usually done in "rounds," starting with a seed round and then moving on to Series A, B, C, and so on. However, these rounds aren't always required and some companies might skip straight to a Series A financing. For seed rounds, convertible debt and safes are becoming more popular than equity. You can learn more about all of this in the articles below!

• Financing options by YC

• Should I Raise Debt or Equity by Venture Hacks / Babk Nivi

• Financing Options by Fred Wilson

• The Truth About Convertible Debt at Startups and The Hidden Terms You Didn’t Understand by Mark Suster

• Announcing the Safe

• How to negotiate with Investors and how to do it

📑 Conclusion

Some founders raise money after finding product/market fit and some of them raise money to “find” product/market fit. In both cases and as we have seen it before, finding ideas, validation and product/market fit are the foundation of your success as a bootstrapper. To make this journey much more easier for you, you need “Networking”. Learn networking same as you learn how to code, it’s a skill that you need to develop, and believe me some of your biggest problems could be fixed with a single phone call. There you have it : Finding ideas, Validation, Product/Market Fit and Networking.

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