If I had it all over to do again, I would do the start up thing after becoming fabulously wealthy on someone else’s dime. If you can pull it off, I highly recommend this is the first idea of funding). Unfortunately for me (and for many I know) that’s just not the way it happens. Sometimes people get into start-up mode because that’s just the best option there is. It can be easier to create a job than find one.
It’s true that most everything costs money. But let’s look at what money truly is: energy. Therefore, it’s much truer to say that everything has an energy cost associated with it. And if you have the right energy (either your own or through a partner) you can defray some of the actual hard dollar costs. So the second idea of funding is find or be the partner that has the ENERGY your venture needs.
Regardless of how long you budget for your overnight success to take, know this: it will take longer. And by longer we mean many more days without pay (this is important to note, most funders aren’t going to pay you for your time…that’s your “give” to the project. You’ll get your money when it works). So the third idea of funding is Don’t quit your day job until your venture is ready to make you some money. This is a very tough one because there are only so many hours in a day and you want to give your best to YOUR idea, not the job, right? Trust me, you will figure it out.
In an ideal world you can work on your project with someone else’s money who has the same goals and aspirations as you. If you can find a client who wants to build what you want (4th idea), than you’re in a pretty good position to focus your energies. You will want to figure out if you want to add them as a true partner or contemplate some licensing agreement that allows them exclusivity.
When it’s really time to get funding (be it from angel investors or venture folks…you’re best served to not go the venture route until you have at the very least a prototype…an angel may take a flyer on your idea. a venture won’t 99% of the time). They are going to ask you “How much have you invested”. They likely won’t be impressed with your answer of time…they want to know about capital. They are also going to want to know about what others have put in. This is where we look at the Four F’s (idea 5):
- Founder(s)- It’s your idea. You’re going to have a hard time getting ANYONE else to put money into if you didn’t do so first. Don’t have a lot of money? Well you had better start looking at what you are going to put into it that a funder will find of value.
- Family- It’s easy to think mom and dad or your favorite aunt and uncle or your wealthy brother may want to throw gobs of money at you. BUT, remember, these are the same people with whom you will be spending many holidays for years to come. Do you really want to have to answer how the project is coming along (assuming they’re nice about it) or WHERE THE HELL IS MY MONEY (assuming they take a less tactful approach) every three months? If your idea and plan are rock solid, you have no reason not to involve them. If on the other hand…give it more thought.
- Friends- Friends are like family with the small exception that you actually choose to be around these folks. The same thought process as found in family applies here.
- Fools- Last, but certainly not least. If you find the right “Fool” (and hopefully they’re not really fools, you may find your investor. These are people who have money to play with and may be willing to bet some of it on your plan. I actually didn’t make up this word, these are the Four F’s of funding as originally shared with me by the legendary Fritz Spademan (RIP).
The 6th idea is that you had better get used to eating some Ramen Noodles. Yes, I mean this literally…and figuratively as well. The lifestyle of the start-up entrepreneur is about starting up a company. There is little time and certainly no money for much else.
Funny thing about funding is you probably don’t need it when you think you do and are likely to need it when you think you don’t. Even less funny is the idea that those people who you’re going to want to fund you and you will be at odds. You see, wealthy people value their wealth more than you value your idea…at least as far as they’re concerned. It’s a sticky situation: The funder thinks the money is more important than the idea and the entrepreneur thinks the idea has more value than the money. Your goal as the entrepreneur is to show the investor how your idea will add to their wealth (idea 7).
Are you in the process of seeking funding?
Have you found what is shared here to be mostly true or were there things you found differently?
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