When I first started working on my start up, it seemed that until it was generating revenue,it would be pointless to ask anyone to invest. So I pursued it myself. Now that I have spent about $300K in development, I have a working product with paying customers. But I think I need investment to make it grow and I'm not sure the next steps. A local business association agreed to promote the solution to 70 members if I provided a 15% revenue share. As an example, for the business that referred me into their local association, the annual cost for me to deliver them services was $300 a year. The amount they paid for the service was $3,000 a year. Client is reporting results of $40,000 a year in new client acquisition. We expect their results to increase and have agreement to raise the cost accordingly. Our cost of service will not rise. Need help in understanding funding options to help grow the business now that I see it has roots.
To provide you context to my answer, I'm an active angel investor investing in early-stage tech companies and an entrepreneur who has raised funding and formerly a VC associate for a $500m fund.
This answer has the potential to frustrate you but without understanding the details of your business, it's almost impossible to provide anything than a very general statement around funding.
So here goes:
Amongst experienced tech investors, revenue can actually hinder your ability to raise expansion capital. The evaluation of a business like yours is no longer "does the concept have potential" to "how big and how fast can this business become?" Despite how difficult it is to do what you've managed to do (congrats by the way), the question is now entirely on how efficient your customer acquisition is and what the real life-time value of a customer is.
That a local business association promoted it to its members is good for you but what are the optics of this deal? In other words, if this was the primary way you acquired customers, how efficiently could this scale?
So in order to raise investment from sophisticated tech investors, you will likely have to work and help create a narrative and provide the evidence that you can go from being a great bootstrapped business for yourself and a few others to a business that has the capability of generating a 10x return at the valuation you bring in new investment at.
There are other options as well that may be less daunting but without knowing more about you and your business it's impossible to give any more useful details than above. I'd be happy to do a call to give you more detailed help.
Congrats on your success to date!