Wednesday, December 12, 2012
Bootstraping your startup
So, you have your killer business plan, lined up mentors and assembled the best team you can find. You have your financials down and you know where you need to hire. Now you need money -- the question is always where do you get it from?
In my experience from starting multiple companies and mentors many other, getting money from your customers is the best -- by selling things to them. If you can Bootstrap. Bootstrapping introduces strong discipline around management of costs and cash flow. Cash is King!
An innovative way to raise money quickly from your customers is by crowdfunding using Kickstarter.com. This website, and others like it, are going to completely disrupt early stage venture capital by allowing companies to take pre-sales quickly.
Don't dilute your shareholding and lose control. Keep your operating costs low and get your business to "Profitability quickly". Finding out how much you need is the main job of a startup CEO. You need to keep the company healthily funded -- running out of money and the game is over. A Savvy investor can smell your weakness and will wait till you run out of money and then will "renegotiate" the terms. The less money in the bank, the more desperate you will be.
If you have a cashflow negative business, one or two unexpected runaway cost will become very toxic very fast if you have investors, and the pressure will build up and if you cannot deliver expected results, things easily turn sour.
Many good businesses find their markets fast and start selling to create revenue in their offerings and learn and adjusts their products and services before selling more. For a cashflow positive company with a list of customers, it is easy to show investors that you understand the market and you have a desirable product. You can always raise a lot more money to expand and go regional than just to start, and give up less as well as you will be negotiating from a stronger position.
-- Robin Low