HN Explorer

Need help, investors lied to me

4 points by nomadpass ↗ HN
Hi,

I spoke with over two dozen investors, and most of them more or less overstated their promise to invest in my seed round if I could execute an MVP. A select few offered to invest between 3-4 million for a seed round if I could prove we can build an "airbnb killer."

The MVP is here: https://nomad-pass.herokuapp.com

Before this I just had a seed deck: https://drive.google.com/file/d/10OS9xmQws4wienCWpGdnf8bU1l74zFa5

It is discouraging since we managed to get the MVP online in less than a week.

Most of them complimented the speed, efficiency, the beautiful seed deck presentation, and loved the concept and differentiator.

But most of them wanted to offer me less, coming down to 2-2.5m for the seed round versus what we had previously established as a base at 3-4 million.

UPDATE: Unfortunately these were verbal offers as some described.

I am asking for help from any founders here who could help put me in touch with the right investors, trustworthy, kind and caring, who can help me continue to build Nomad.

The concept behind Nomad is for guests and hosts to pay zero in fees, no cleaning fee, no surprise checkout fees, and all listings require self check in, along with a points rating system of 4.5-5.0 for hosts like Uber.

I think many of us are tired of Airbnb's exorbitant fees among other complaints.

The biggest difference is that Nomad can allow landlords and tenants to pay/receive rent through the app, without credit checks, income requirements or lease agreements, so long as both agree.

Am asking for any help from any founders or investors who want to help as well.

The MVP allows users to register, view, book, and search for listings by location.

It uses Ruby on Rails with a PostgreSQL database on the back-end, and React.js and Redux on the front-end.

Thank you from my heart to all who can help, it has been a difficult time having built an MVP through alot of sheer hard work only to learn a hard lesson to not trust what investors say :(

16 comments

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rogerkirkness
If you didn't have a document that says they will invest X amount under Y conditions, you did not have an offer. It is not unusual in business for people to make a conditional verbal indication of feedback, such as that you need to make more progress in X area before they will invest.

From the sounds of it, people are offering to invest up to $2.5M in a consumer company with no users based on a deck and MVP? You should take the money, that sounds generous. If someone backed out of closing a signed share purchase agreement, talk to a lawyer. This just sounds like a hard business lesson.

nomadpass
Hi Roger, do you know any investors who you had a good experience with?

The 2.5m were not founder friendly, it would have diluted me to over 20%.

I am looking for something along the lines of 1.5m-2m for 15-20% of the company.

mtmail
Out of the gate, a website with no users, is going to be valued 10 million USD?
nomadpass
I didn't decide on the valuation, it was pre established. I thought the norm was 7% for 500K, and I assumed that was kind of the standard in the pre-seed world, so it makes sense for seed rounds to be on average 2 million for 10-20% of equity dilution.
bitxbitxbitcoin
There’s a sense of entitlement here that I don’t think is going to lead to that many referrals from the HN crowd.

What you have described seems like standard fare and a lesson learned.

Glhf, fellow nomad.

mtmail
There's countless stories where founders don't receive a 'no' but instead 20 rounds of 'sounds interesting, please keep me informed once you have X'. X can be users, customers, revenue, team. The goalpost shifts. Or don't even shift but the discussion is moved a couple of months into the future. The VCs goal is to not to burn bridges in case the project really takes off.
nomadpass
The X in this case was to deliver an MVP.

I think we accomplished that. I don't think we can go further without funding because we need developers and help and funding to pay for our hosting needs.

al2o3cr
First off, a small issue of terminology:

    The concept behind Nomad is for guests and hosts to
    pay zero in fees, no cleaning fee
I used the "log into guest account" feature of the site to book a 22-day reservation and the receipt showed this.

* $580 x 22 days: $12760.00

* Cleaning fee: $510.40

* Service fee: $1020.80

$1531.20 is kinda... not zero. ¯\_(ツ)_/¯

Second, IMO your "MVP" isn't demonstrating the "product" part; a well-designed reservation site isn't terribly innovative. For that matter, it's unclear from the pitch deck what the "product" is: is it the $30k/yr "Nomad Pass" that's mentioned on two slides? Is it star ratings? Is it the app guests use to measure the wifi strength? The deck mentions (on slide 20) getting bookings "irrespective of timing", maybe sourcing tenants reliably is the innovation?

gus_massa
Perhaps the problem is that the investor don't consider the backend+webpage a MVP, they expect to see at least a few hosts and guess using the service.
nomadpass
Yeah, but that means going full production live which means I wouldn’t need investors if I went that route
remram
Unrelated to the question, but what is "a points rating system of 4.5-5.0"? Do you literally have the lowest score be 4.5?
nomadpass
Just like Uber temporarily suspends drivers who below 4.5, we will also.

My goal is to have high quality hosts and stays. It motivates them to keep up quality if there is a points system

remram
Why not have some sort of report/complain system? Having it be a "rating" system where everything except "5" means "unacceptable" is weird.

Is that how you would use, say, IMDB? Every movie under 9 stars doesn't get a watch?

moistly
LOLWUT? Are you shitting me? One can write a pretty but not really functioning website (searched Lahaina, got a poorly laid-out website showing San Fran) and dupe suckers into giving you millions to develop a product that already exists several times over? Goddamn, you pissers-away of money, go build potable water supplies in third world countries and win your souls back instead of gambling that some middleman “it’s like booking dot com but with unicorn sparkles” is going to make you marginally more wealthy, as if you fucking need more wealth anyway.
Mikeb85
You don't have anything. You never had a deal or even an offer, you had vague indications of interest.

Also seems like you don't have much of a product either. And finally, for those who whine about AirBnB cleaning fees, it reduces the relative price of multi-day stays...