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Pushing on without investor support. New company or not?

I’ve done a seed round on convertible debt & I am now out of money.  The original product idea has changed since the round, but current investors aren’t backing me by extending the round.  I don’t blame them, but I have a new direction and I think it has promise.

I’m going to push on, but want to ask what everyone here thinks my obligations are.  The new direction came while still using seed money, but I’m sure it will change and morph as I dig in.

Should I continue under a fresh new company or the current one?  I am writing personal checks to keep the dream alive.

  • The issue will end up being felt if this thing gets big. They could potentially bring a claim against you saying that the idea was conceived and developed within the entity that they funded. It would be best if you could wind down your current entity and get them to release you from any obligations and also release any rights they have over you.

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    • Do you ever want to raise money again? Why would I give you money if when things get difficult you will come to me and say you need more money to continue….yet close down the entity and startup again?

      Shit happens, your investors know this (if they are professional investors). Figure out what you can do to prove your new idea is viable without raising money – go talk to customers and get LOIs. Or build a scrappy prototype and get some users.

      THEN – ask for more investment if you have traction.

      Reply

    • Sorry, didn’t mean to reply to your comment.

      Agree with you saying they could possible make a claim on the new entity especially if any IP was transferred to the entity.

      Reply

  • I’d talk to the existing investors to see what they are willing to go along with.

    The convertible debt isn’t going to disappear either. Depending on the terms, it might well poison any capability you have to raise new funding – especially if it was a large sum (6 digits or more).

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