Today, I’ll open up about money, and why I am going to invest $1M into Finic, Inc.
The reason I started this blog is to be 100% transparent with my readers about every little detail behind my business: money, hiring, firing, successes and failures.
It’s April 1, 2015, and as of today, my company Finic, Inc. has burned a total of $1,396,113 a huge amount for a startup, I know. We are a couple of months away from Finic’s first product public launch, and we used this money to build our product to get to this point.
I am the owner of another profitable affiliate marketing business. The entire sum of $1,396,113, which Finic has burned, was invested directly from this other business I own.
During the course of a year, I invested in amounts of $50K to $150K per month. In other words, I bootstrapped the company by investing small amounts of money only for needs we had month to month. Once we would burn through the small amount, I would invest more money the next month. I can tell you now, this was a bad idea.
It would have been much better to invest a fixed amount of money such as $1M and say, “This is it. We have this amount, and we have to get to this milestone. We won’t invest any more money until we reach this milestone.”
There are several downfalls when trying to bootstrap a company with small amounts of money invested every month.
Here are a few downfalls I’ve noticed:
- The team begins to feel like a well-funded startup and gets a little too comfortable. The idea that we have a fixed amount of cash to achieve a goal is not present.
- Some employees may feel like Finic is already profitable. Since cash always comes every month, it is easy to feel the company is doing well financially.
- Some employees may worry that we spent too much, don’t have enough money left and might get in trouble soon. Since it’s a constant investment of small chunks of money from another company, it’s hard to put a dial on the real financial situation.
I’ve learned my lesson. Today, I’m going to invest $1,000,000 into Finic, Inc. It will be a one time investment to achieve the following milestone, which we agreed on as a team:
We will use this money to test our business model and prove that it is a working model. Only when we are 100% sure we have a working business model, and if it is necessary, we will bring in additional investments.
This money will come from the same affiliate marketing company which I used to bootstrap Finic in the past. Only, this time, it will be a one-time investment.
This is going to be a convertible note with a $20M valuation cap at 15% discount. I also converted all previous investments in the amount of $1,400,000 to convertible note with the same terms. I think this is more than fair.
I have just made the transfer of $1,000,000. Below is the screenshot of our bank account as it stands right now, including leftover money of $3,886 from the previous investment. As you can see, we have $1,003,886.53
I made calculations and spoke with key people at Finic. We agreed that one million dollars will be enough to bring us to the next level, getting us to profitability or at least to a point where we’re 100% sure the business model is working well.
At that point, if we need it, we will raise money from Venture Capitalists. We, of course, would rather be profitable and not raise any more investment.
At least once a month, I will post updates, such as this one, on how much money we have left, how much we spend and what we’re spending on. It’ll be interesting.
I’m doing this to hold myself and our team accountable to our commitment.
Self-accountability is important to me. Gary Vaynerchuck’s father, Sasha, taught him this very same lesson: stick to your commitment. If you say you’ll do something in the future, do it no matter what the circumstances are. You can listen to him speak about this in his interview here:
In my next post, I will describe our business plan and budget for this year.