Focus on Sweat Equity
Sweat Equity is the best start up capital. Some of the greatest business start-ups has been made with little equity capital. Dell Computer, Microsoft, Apple, and HP started in dorm rooms, tiny offices, or garages. To start-up you need only a well-written 20 page business plan and some spreadsheets covering expenses, together with how big revenues you needed to make a break-even.
Most entrepreneurs tend to think in terms of what raising money means to them. How it can get them started? How many people they can hire? How much they can spend on office space? How much they can pay themselves? They forget to put themselves in the position of the person or company they are asking for frommoney. They think they are considering that person’s position by making up numbers and calling them expected returns for the investor. If you only give me x dollars, you will get x pct back in x years. You will double or triple your money in x years. Any investor worth anything knows you are just making these numbers up. They are meaningless. Worse, if you tell a savvy investor that the market is worth x billions of dollars and you just need one or some low percent to make huge revenues, you are immediately dismissed.
The minute you ask for money, you are playing in their game. They aren’t playing in yours. You are at a huge disadvantage, and it’s only going to get worse if you accept their money. The minute you receive money, the leverage completely flips to the investors’ advantage. They control the destiny of your dreams, not you.
Investors don’t care about your dreams and goals. They love that you have them. They love that they motivate you. Investors care about how they are going to get their money back. Family cares about your dreams. Investors care about money. If you can’t deliver on that promise, you are out. You will be removed from the company you started. You will find someone else running your dream company.
The best sources of capital for startup entrepreneurs are your own money and your customers’ money. Businesses don’t have to start big. The best ones start small enough to suit the circumstances of their founders. Started to ask for an advance from your first customers. The business does not have to grow quickly during the first couple years. So what’s wrong with that? It’s ok to start slow. It’s ok to grow slow. As much as you want to think that all things would change if you only had more cash available, they probably won’t.