Founder, Investor and Entrepreneur: 15 years of deep technology background in Defense/Aerospace at Boeing Phantom Works. President of Gridlogix, a successful energy/internet of things start up. Adviser, executive and investor in numerous early stage companies. Experienced in wide range of technologies and start-ups. Good at dealing with difficult situations and avoiding them. Through my career I have invested about $600m in early stage technology/ research, acquired several start ups, and successfully sold several companies. I also have had some solid failures which probably taught me more than the successes.
I have been in this very situation a lot of times. You may need to move on. When selling you need to verify the person has budget when they are a prospect, early in the process. Your well beyond that point. If they don't have budget, you need to move up to the guy who does, altering the value proposition to get them moving. Alternately, you need to downscale your offering so this one guy can approve it and you can get to work. 99% chance he is really blowing you off. Go for the throat and ask him "what needs to be true" to get going now, as in what can be modified in the offering. Get him to say "go to hell" or "I need to push this harder". In my worst (turned in to best) experience, the guy we were selling to had budget for $30k - dragged us out forever, we pushed up to his boss and closed a deal at $2m (paid up front). Give me a call, I can probably answer this better in a 15-20 min call.
John Doerr, principle at Kleiner Perkins, often says "A true entrepreneur delivers more than expected for less cost than expected". You want to raise money when you understand your market/product well enough that the money funds an assured plan for growth. The plan will have risks and challenges, but you want the money to fund things you have validated in the market place, not supposition.
Specific to social networking in early stage, a market of 1,000 active users is more meaningful than 10k inactive users. It is hard to get a good venture firm to invest if you have less than 20k active users. Growth/user acquisition cost is a key factor in gaining smart investor attention.
The conversation you want to have with the VC is:
"Based on the use patterns of our X,XXX users, we see our network doubling every 60 days and revenue per user growing 30% each month. The funds we are raising allow us to expand this model to 100,000 users, to achieve average revenue of $XX/user/Month growing at 10% CAGR in year 2 and 3."
These are all good answers. I will give you my simple answer. If you are running an early stage business and the details are getting out of your control, your focus is too broad. Narrow your product offering and target market, systematize the solution, eliminate the variations that cause the confusion.
Staff augmentation vs. project work in A&D are really two different companies. Another key segmentation is work that requires certification (NATO Clearance, secret clearance, Airbus/Boeing training, etc).
On staff augmentation, a lot of young firms start off bringing in good ex-employees of the majors and and targeting the supply chain. Often the majors Boeing, Dassault, etc like it when subs use talent that already know the primes practices.
If you are targeting project work, you need to define if you are selling skill or price. If your the best team for converting major assemblies into a stream line lean process, you need to clearly define that and sell it into the targets.
In all cases, you are likely to get your first customers in the supply base. The supply base is likely trying to win a bid or execute a current contract. They want to mitigate risk using temporary labor, especially if you are in a EU labor market.
If your model is to sell outside of the Primes, for example selling aerospace talent to boat manufacturing, I would stick more to project work with a few key initial clients. Create an iconic success. I would also look at the UAV market. There is a lot going on there. Often the people creating UAV's are more controls focused, they might like having someone else be there air frame team.
I was heavily involved in the lean manufacturing movement at McDonnell Douglas and Boeing. Mostly on F/A-18, but also C17, 787, UAVs, etc.
I need to know more about the type of software you are developing and how big the team will need to get in the long term. A few key rules: 1) Your first 10 people should be the best you can find - alter the organization to meet capabilities of the first 10 employees. 2) Don't hire anyone who is not exactly what you are looking for (Go without until you find the right person) 3) As CEO, stay hyper focused on product management - if you define the wrong product features, your organization no matter how it is structured, will waste its time. Frankly the CEO should probably do Sales/Marketing for a while. 4) For book keeping and such find a mother who's kids are in college. She is great at managing chaos and will compensate for your ADHD (all great entrepreneurs have ADHD). 5) No part time people on core jobs (i.e. development) 6) Don't outsource any part of the product that is close to the customer feedback loop. i.e. don't outsource the iPhone app if that is 90% of how you engage customers. You need a really tight lean update loop on product requirements/product evolution.