How much money do you really need to start your company?(blog.kveton.com)
blog.kveton.com
How much money do you really need to start your company?
http://blog.kveton.com/2011/09/23/how-much-money-do-you-really-need-to-start-your-company/
8 comments
Certainly not. But on the other hand, without those 41 million dollars, they would not have been able to spend six months developing a brand new product (that looks much more interesting than the first one) without generating a cent of revenue in the meantime. Years of work and development have an opportunity cost, and with more money, you can buy some execution time and be there on time.
I'm a fan of bootstrapping, but it's not always an option. Plenty of opportunities in consumer require a critical mass before you can start making money. These are the kinds of plays that make sense when VC is flowing more freely. For some businesses, it really does take 10 developers plus 5 others working for a year to hammer things out. That clocks in at $2-3 million, which just so happens to be a reasonable Series A.
This is absolutely true, different businesses have orders of magnitude capital requirements to get off the ground. However the big change in the last decade is how many more scalable businesses are possible to get off the ground with very little capital. If you want to take a shot at something big, more power to you, but if you're a first-time entrepreneur personally I'd recommend bootstrapping. That practical knowledge of how to find product-market fit, even on a small scale, is infinitely more valuable than all the big-time planning you can dream up.
We are exactly in this situation right now. We have used our own money so far and it will soon be depleted. But we haven't found a good MVP yet. Now the question is to know whether we should raise money from friends or go back to work on part-time jobs to keep the ball rolling. It really is a tough choice.
Personally I prefer to have a MVP before taking anyone else's money. I don't think its good to takes a friend's money so you can do some more 'exploring' - especially with the track record of not being able to find a MVP with your own money.
- Imho I would go back to part time work, and use only your own money until you've got a nice MVP, then perhaps you'll end up finding out you don't need others money.
- and when you do go back for money - make sure to have a answer to what you'll use it for (that should be the pitch for the money) .. along with # of users, Rev, Profit and some basic projections (Both good projections and worst case)
- Imho I would go back to part time work, and use only your own money until you've got a nice MVP, then perhaps you'll end up finding out you don't need others money.
- and when you do go back for money - make sure to have a answer to what you'll use it for (that should be the pitch for the money) .. along with # of users, Rev, Profit and some basic projections (Both good projections and worst case)
How do you mean you haven't found a good MVP yet? (Just trying to parse that.)
In entrepreneurial circles, MVP commonly stands for Minimum Viable Product. This is the smallest set of features your product needs to be viable as a business.
Yes, but it's not something you find, it's something you build. Which is why I asked. It looks like he meant "we haven't found market fit yet".
Indeed you are right. That is what I meant. And building a product that reaches market fit takes some time and quite a few iterations.
What I call a "good MVP" is a product that fits a market, something people want and are willing to pay for.
You should probably say "market fit" then.
I honestly find it hard to believe that people are actively looking for a specific investment but don't know what they would do with the money if they got it. It sounds like they want to be a startup groupie and raising funds is their entry ticket.
I wholeheartedly agree, having bootstrapped myself, but can't stress enough the importance of having the right team members on from the start. When pay is minimal and launch stress is high, one sour grape can easily spoil the bunch.
Finding what customers will pay for is the single most important skill in any business. Having worked full time out of school for 12 years on my own has taught me how to create value for customers in a lasting way. I can only get better and better at it every day. It's the single most important skill I can have and work on, and translate to a product of my own -- find how an idea will work as a business.
Bootstrapping has a short runway based on our own pockets. VC funded runways are often more controlled by outsiders.
If you can bootstrap to breaking even, you can let it sit and grow for a longer time even if you return to other work, in a way that VC backed startups wouldn't linger.
Sometimes great ideas need to let the market / demand needs to grow. Like buying property before area area starts to re-develop. If you have a business that's selling already, it will help get better and higher amounts investment should you want to go that route.
Imho, VC's want to be water to an already sprouted and growing plant.
Great link, thanks for sharing 0.02
Bootstrapping has a short runway based on our own pockets. VC funded runways are often more controlled by outsiders.
If you can bootstrap to breaking even, you can let it sit and grow for a longer time even if you return to other work, in a way that VC backed startups wouldn't linger.
Sometimes great ideas need to let the market / demand needs to grow. Like buying property before area area starts to re-develop. If you have a business that's selling already, it will help get better and higher amounts investment should you want to go that route.
Imho, VC's want to be water to an already sprouted and growing plant.
Great link, thanks for sharing 0.02
Well put! I've just embarked on a bootstrapped startup myself with the aim to get out an MVP as soon as possible. We have a good small founding team and with the age of free/almost free tools and resources, there's no reason we couldn't bootstrap until we get the MVP into the hands of customers...
This is great advice for a certain subset of companies, mostly consumer-based (either directly or indirectly) web startups.
If you were starting a more technology intensive company, you could very well need to raise a ton of money to start building a basic prototype.
I wish authors would qualify their bold statements.
If you were starting a more technology intensive company, you could very well need to raise a ton of money to start building a basic prototype.
I wish authors would qualify their bold statements.
I also have another take on this -- those who want XXX,XXX in funding and say they will be killing it RIGHT NOW if they had the money don't even have what it takes to really get deep in there and grind it out -- putting in years of work and development. You can't just throw money at everything and it will become the next big thing -- Color is a prime example of that.