As you all may know, my posts are always put on multiple channels for the readership to explore. I've had an interesting comment show up for my blog post The Need for Funding for a startup right at the start so I decided to make another blog post to answer.
"You pose a very broad, general theme (Start-ups) and you try to prove it by one very specific, off-line shop. But would it work with - let's say - an online enterprise who needs some technology to interact with their target group. Curious to your answer. Thanks." by Robert L. Eikelboom
Yes, it is only an example that demonstrates clever thinking to reduce funding need (or eliminate it) to get ahead with your business.
However, every business is different.
In your example of the online enterprise that needs technology, let's say a community platform to communicate or do customer support to their target group, core to their business and revenues, I figure.
This is a little different since you can't grab stuff from your garage, stuff it in a van, and start doing it to build up momentum. It requires coding, which means a capable dev on the team that is willing to do it for equity or future rev-share etc... not an easy thing to find. Sometimes if you can't find such a person to partner with, you will need to raise funds to dev what you need. At least that's what it seems at first.
Alternatives:
- Start your business in a way that you don't need that online tool at all, even if it means another business in a related field online to generate a bit of cashflow first with what you have (other partners and yourself expert in certain things that can be "sold").
- Partner with a development company that is interested in entering the same market you are and make a deal and share profits with them for a certain time.
There are likely more but those are things I've done with my own projects in the past.
In the first case it was because we had no budget to develop a rather complicated game, so we made web sites on contract since one of my main partner was a web designer by profession in the first place to generate cashflow, while I created other useful partnerships to line up the money for development. Took a bit of time, but we got the game done on a significant game engine to boot. Now its easy as pie to develop games on top of that tech and we also have a strong service wing to build or gamify web sites or sell games and game concepts to people.
On the second point we did that to expand into another type of development we had no expertise in and to avoid finding, hiring and managing the staff to do it properly, something we felt we didn't have the proper cashflow to do safely ourselves yet we had the distribution connections to pitch the sales. So we found a company that was looking to enter the game space but that were experts at the type of software we wanted to make. So they brought the skillset, we brought the concept and the sales channel and network, and we started doing that.
These were early days.
When you raise funds, ideally, it is to accelerate growth in your business, or for instances where you absolutely need a bit to get going (it happens sometimes there are no other alternatives). In my experience it is rare.
Raising funds for a startup is a fast and no brainer proposition to get going, but unfortunately, you'll likely give away control of your company, and if there is lack of experience with the founders, likely the money won't be spent properly unless the funders are really involved and really knowledgable about the space your in to babysit you along in the right direction. Sometimes the owner is experienced enough and strong enough with experience so that it just makes sense since with his "story" he can raise the funds easily and not waste anything. Those stories are usually from people who have had businesses before and want to repeat. Those guys, funders like and will risk more on them for more money anyway.
Hope this helps more people.
No comments:
Post a Comment