This is a great post. You focus on investment bankers’ value to the seller, which makes sense given that your target audience is entrepreneurs, who are usually the sellers in an acquisition. However sometimes entrepreneurs are also buyers, and buyers often hire bankers as well. What do you see as the value of investment bankers to the buyer?

Thanks,

Jordan

Most of the first monies raised go to hiring engineers and building the product with a little spent on rent, etc. Once the product was built we did limited marketing until we could prove we could make the economics work.

Another question for you. You say in the begining, trying to get VC funding will most likely get you a valuation in the sub to 1 mill range (that is if you get any funding at all). Question is, if you raise angel funding in the begining, what kind of valuation should you give your company. I mean I am sure most angels if they are investing betwen 10-50k in a company would shy away if you have a valuation over 1 mill as that will give them a very small share and a much higher risk. What did you do with Zingy when you first received the 1.5 mill in funding from angels ?

Note that we always set the expectation that we were eventually going to charge in order to attract the highest quality users possible – those that might convert to paying. When we started charging we lost 95% of the users, but were left with 50,000 paying customers – which cost us a lot less to acquire than if we had tried to acquire by charging from the get go.

In your online interview, you talked about first reaching the 1,000,000 subscriber milestone by giving away free ringtones. These days with the “social web”, that number is very impressive and bodes very well for a companies valuation if they are able to get that many subs. I wanted to ask you what your methods were in reaching the 1 mill subscriber milestone ? Did you spend money on advertising or was it mainly word of mouth ?