[shooker435]

There's a hidden glimmer of wisdom in here, which is to let your (cash) customers contribute to funding your (equity) business growth.

My theory is a niche consulting firm can perform services to make enough money to build out a product, and better yet, they're being paid to learn about user requirements along the way.

I'm on a similar journey right now, and it's always difficult balancing the dopamine and temptation of a short-term cash injection at the expense of development time spent on the core product we're scaling.

[ahoog42]

This is exactly how we built viaForensics in 2009. For the first five years, we performed mobile forensic investigations and gave trainings based on the Android and iOS forensic books we wrote. We were able to self fund software development for the first five years. When we moved from forensics to mobile app security, we required more capital to build our automated software which led to our Series A.

Having an established business with customers in revenue, obviously significantly helps in the fundraising process and evaluation. The other huge advantage is you can benefit significantly from the Qualified Small Business Stock statute which provide an exemption/shield on federal taxes when you sell that is the _greater of_ either $10m or 10x times your valuation at the time of funding.

[pbronez]

Yes, but it takes strong leadership. Service and Product companies have important structural differences in many areas, including finance, culture, technology infrastructure, and project management. I’ve seen many companies start on one side, try to add the other, and fail hard.

[shooker435]

I'm convinced it can only happen if the company is laser-focused, or really small.

I also believe resource constraints create innovation, which these companies are particularly poised to do.