Financing a Startup is one of the most challenging aspects of starting a new business. When it comes down to it, you have to navigate venture capital firms, angel investors, and weigh the value of capital against losing control of your own company. Many startups fail because in the early stages of the business they did not have enough funds in the development stages. Others fail shortly after launch even though they have an amazing product, but have run out of funds to market the company and gain the critical mass needed to sustain operations. This is a painful thing to hear because there are simple solutions to getting start-up financing and business credit to help grow your start-up into a full-grown business. We have 3 questions that we would recommend any startup ask themselves before seeking funding from external sources.
1) How much money do you really need to get your startup off the ground? There is no doubt that he is shaking his head at the near absurdity of this question; However, you’d be surprised at what you’ll find out about your business when you look at how lean you can really run the business at first. Many businesses believe they need a large store, high-end furniture, and a full staff the day they open their doors. For most, this is a good 5-year goal, but in the beginning you can do what Apple did and start with an idea and a handful of talented employees. If you haven’t read Re-Work, it wouldn’t be a bad idea to check it out, as there are many principles that can save startups a bit of a headache in the long run.
2) Are you willing to become an employee of your own company? This may also sound like a strange question, but when you decide to work with a venture capital firm, in many cases, you will be accountable to investors in ways you may not have originally anticipated. There are stories from Silicon Valley to Dubai that begin with an enthusiastic entrepreneur and end with a burnt-out “employee-owner” who is forced to take his startup in a new direction due to the influence of his investors. Beware of contractors.
3) What will happen within the first 90 days of getting the financing you need. There are companies that have a minimum financing guarantee of $50,000 that guarantees that qualified companies can access the financing they need; however, it is incredibly important that you have a clear vision of what your priorities will be after receiving funding. It sounds so simple but many times companies are financed without a prioritized list of needs; and after getting more than enough funds, they find themselves without essential items that they should have acquired from day one.
