[trcollinson]

How did you come up with a $1MM valuation? Do you have users? If so, how many? What is your path to profitability? That's a 5% stake which might be ok. It really depends on a number of factors. My guess is that in the iOS app market for a chat app in 2015. I think that might be high. But you might also surprise me.

[jhamar]

Well we have been unofficially launched for two months and just passed 1,000 MAU'S. We have a couple of high profile users (NBA ALL STAR) and we are going to launched again on Product Hunt next week by a well known influencer . . . . The market is growing and we are solving a problem that many others have abandoned. It's just about growing this thing. We need 50k for the next year to focus on growth and increasing the valuation.

[trcollinson]

I'll try to tread on this gently. The theme of my comment is "I don't invest in hopes and dreams, I invest to make money."

I know you are saying you are working to solve a problem that no one is looking at but when you say "chat" and "ios" I can only think of saturated markets. You have all sorts of chat solutions for all sorts of needs. What makes you different? What will get you millions of users? Saying you have influencers and NBA Stars brings to mind, well, twitter. And honestly that doesn't help. You have an up Hill battle to convince me as an investor. If you can, I'll invest.

Second, your valuation is way off. Within the last 18 months we have a really successful sale of a venture backed chat application, whatsapp. They got $42.20 per user valuation. That would place you at a $42,200 total valuation. Of course, that's just a fake valuation, you aren't there. The only reason whatsapp got that much was because of the volume of non-US users they had. You have no volume. You are trying to sell me that you are work $1,000 per user. That's an up Hill battle as well. Unless you have a massive market differentiator, it's a tough sell.

I'm not saying it will be impossible. But you need to show me how I am going to turn my $50,000 into a lot more. If you can pay me back within a year, I'll take $75,000 total. If you need it for 10 years, I better see a 1000% return. Remember, many other people have startups which will give me that type of return. You have to show me why you're better than them.

[argonaut]

This is really inaccurate. These sort of metrics have very little relevance in seed investing. For better or worse (and some of the savviest seed investors have done ludicrously well this way), seed investing is not about your numbers; it's about the team, the market, and the idea. No reputable seed investor in Silicon Valley calculates seed valuations this way (a scaled function of Whatsapp's valuation and the startup's own user numbers).

[trcollinson]

I appreciate your dissenting view. I don't mean to say this is the only metric by which a seed fund will evaluate a business. If it was likely that there was any market for ephemeral twitter, then the per user valuation would be totally meaningless, you're right. But after looking at blast chat these would be my questions. How do you grow from 1000 users to something higher? How do you turn a profit for me? Of course if the team were amazing and the product had any hope of being pivoted into something lucrative, I would be interested. But, from the looks of it, to me, it's not.

A few other thoughts. Nothing about this post says that this group is in the valley. Not all seed investors are in the valley. Not all companies are in the valley. It's a poor assumption to think they are.

Seed investors want a very healthy return on their investment and they want it relatively quickly. You may invest $5,000,000 or $50,000,000 or whatever amount you'd like blindly in whatever increment makes you feel good. But if you don't evaluate the investments you are making, you won't he investing for long. The "Savy Silicon Valley investors" don't invest blindly.

I've been told many times when rejecting a company that I have made a poor choice because of x, y, or z. My reply I'd always the same, "feel free to pull out your own $50,000 and invest. I have plenty of opportunities." I don't mean it to sound snarky. It's just reality. Investors always have processes. This is mine.

[rajacombinator]

You clearly don't invest in early stage startups. Alternately, one can read this as "unsophisticated non-SV investor's perspective."