Ask HN: Can we take investor capital and keep our lifestyle business culture?

[hank_tepaliu]

We (two founders) work on a project that requires an investment of 350k-500k until it should be making enough profit to sustain daily business and growth (3-5 employees). We do have some, but not all of that money and will need an investor.

Currently, our company is run like a lifestyle business: two founders working each (very productive) 30-40 hours per week on this project. We do not want to sacrifice this culture.

Should we even bother to find an investor? Has anyone taken early-stage outside money but kept a moderate work/life-balanced business culture?

[mindcrime]

Institutional capital (eg, VC) - no.

An individual investor - maybe.

The VC game is pretty much a "hit driven" business; these guys expect most of their investments to return nothing, and count on 2 of 10 investments being big hits that return 10x or more, to keep their overall portfolio returns positive. As a result, VCs are not interested in funding a "lifestyle business" - they want to fund high-growth businesses.

That said, I think you should be clear on whether you really mean to say you're building a "lifestyle business" or if you're building a high-growth business where you just want to maintain a healthy work-life balance. Those two statements aren't necessarily equivalent.

The equation changes a bit for individual investors. They still want big returns, of course... who wouldn't? And they have to consider opportunity cost like anybody else - if they can invest in your company and get a 2% return, or put their money in a CD and get 3%, then why would the invest in you? Well, some might, because they are human beings and not cold, calculating machines who optimize solely for the maximum ROI. But if you aren't pitching a high-growth scenario and you want an individual investor to invest in your company, you may find that it comes down to them simply liking you on a personal level, or a desire to promote entrepreneurship in general, or other "soft" factors. And the investor probably won't be the kind of person who is part of an "angel network" (eg, a "VC lite") and focuses on tech startups... I'm guessing you'll have more luck with "random rich person I know, or somebody in my family knows" than somebody who thinks of themselves as a professional investor.

[hank_tepaliu]

thanks for your thoughts. to clarify: we intend to build a growth business while maintaining a healthy work-life balance.

based on what we read so far, the early-stage company cultures seem to be split pretty much in the bone-crushing startups (with a lot of outside cash to burn) and the more mellow lifestyle business cultures (pretty much bootstrapping themselves). we have not yet seen the growing startup with a moderate work style backed by outside money (but are far away from the startup hubs to have a representative sample).

[angersock]

What are you working on?

[hank_tepaliu]

A niche product for small businesses in the Natural Language Processing area (sorry for being so vague -- could not check with my co-founder how stealthy we still are at this point).

Our core feature is non-trivial, and much of the capital required is for hiring 2-3 good developers to get the technology right. It's not realistic to build it on our own as a side-project and our own funds would be burned until we got a MVP out (= way too short runway if we just use our own cash).