At which point our startup is ready to approach an investor for seed funding? Or do we get seed funding only with a business plan?
As soon as possible. Period.
The reason being, in my experience starting a e-commerce platform within the automotive space, we thought "let's run a low-tech manual beta, and when we show it has merit, companies will be throwing money at us!".. well.. we were wrong. We had won a TechStars Startup Weekend event, and had caught interest from multiple series A investors, giving us the impression they just needed to see that the platform worked and people wanted it (it was clearly going to be VERY profitable if accepted by the market).
We launched the beta, gaining 90% of the new-car dealerships in under a week and thousands of people wishing to use the platform. After completing multiple transactions (all of which took loads of work since it was all manual, we did not have a CTO or someone capable of building the complete site), we figured we would start seeking investments. We were averaging $3000-$5000 less than TrueCar per transaction and were making profit above what we anticipated. This was months in the making so we only had a few months left of runway to attain investment.
We looked for angels, early-stage venture capital, and even spoke with the series A investors (which we were below their portfolio limit for investment at that time).. everyone told us "it will be at minimum 8 months for due diligence before we would be able to make an offer if interested". I had private talks with angels and vc partners who said we should have started this process as soon as we won the competition, this way they could watch our progress and speed up due diligence.
If we would have known now what we knew then, I would be a billionaire. So I pass on this knowledge to others to explain that it is never too early to begin the conversations. They will watch your growth and see how the market reacts, if it is good, they will be prepared to invest sooner than later.
This concept died out but I have plans to potentially start it up again if I can find the right team, but for now I focus on lower hanging fruit and hope to help others while I prepare for world domination.
Hello Bret, thanks for your answer .It's really helpful to get such feedback from a real life experience. Could you please tell me at what stage was your product when you and your team participated into the TechStars Startup Weekend event? What is an MVP or a beta version?