For all entrepreneurs, meeting angel investors and VCs to present their ideas is a very exciting experience. However, the excitement may quickly fade away when the investors start asking questions about the numbers, especially when it comes to sales and your number is Zero.
Admitting that you have done zero dollars in sales in front of investors decreases your chances of securing investment tremendously. However, this is not the case if you have successfully raised money through crowdfunding.
When the real estate entrepreneur Junior Desinor stood up in front of the sharks from the Shark Tank to present his product Toor, which is a next generation lockbox for buyers, renters, sellers and so on, some of the investors were very skeptical. While Chris Sacca was skeptical about the innovation behind the idea, other investors found the importance of technology innovation for this particular product of not such a necessity. Sacca and Mark Cuban even got into a heated argument over the innovation behind the product.
Undoubtedly, the sales skills of Desinor were extraordinary, but the fact that he has done zero sales prior to his appearance on the show, made the investors question the potential of the product. However, Junior quickly mentioned that Toor has successfully raised a bit over $100.000 on Kickstarter and automatically he was back in the game.
In the end, Desinor had on board not one, but with two sharks. After an intense negotiation, he made a deal with Barbara Corcoran and Kevin O’Leary for $200.000 for 10% stake in the company and $300.000 as a loan.
The story of Toor proves that successful crowdfunding campaign increases the chances of receiving further investment from angels or VCs. Crowdfunding, if it is right for your project, opens many doors, making it possible for the entrepreneurs to seed fund the product development and initial production stage of their companies, to test the product on the market and to prove the existence of a customer network.