Startup seed money
Ways to build a company without begging family, friends for money
If you’re in the process of bootstrapping a company, chances are you’ve read lots of online content on how to do it. In many of these pieces, the authors recommend asking friends and family for money in the beginning.
This isn’t always a smart move, and it alienates entrepreneurs who may not have access to such resources. For those who don’t have wealthy relatives or friends or who hate to be indebted to family, here are some alternatives to consider.
1. Keep your day job and save: “I would get a job, 9 to 5, that pays you the most but that you have to do the least. And then I would build your business in two hours during work ... and then from 6 p.m. to 3 a.m . ... Do that until your business provides you enough revenue where you can just work on your own thing,” says Gary Vaynerchuk, author, entrepreneur and mentor.
If you aren’t fortunate enough to secure outside funding for your business, keeping your day job is the simplest advice that’s often overlooked. Until the revenue from your startup replaces the salary from your day job, save up and use your salary for various startup costs.
2. Cut expenses: As someone who’s bootstrapping a company, are you living above your means in certain areas? Is your rent higher than it should be? Are you spending too much at bars on the weekends? Think critically about this, then make a checklist of the areas of your life you could cut back on.
For years, I was living in Oakland, Calif., paying $2,000 per month for a shoebox apartment. When I had my startup job in San Francisco and was launching my business on the side, the location and price made sense. Yet, after I went full-time on my own business, it made no sense at all to stay in the Bay Area. I was working my butt off trying to pay bills while building the company from scratch.
I moved, first to Portland and then to the Greater Los Angeles area, where I pay almost half of what I paid in Oakland for rent.
3. Take advantage of the gig economy: When you’re ready to make the leap into your business full-time, take advantage of the gig economy (Uber, Lyft, Postmates, Instacart, etc.) as a backup plan.
The best thing about gig economy jobs is the flexibility. If you have a month where business is booming, you won’t have to use the gig economy at all. But if you have a down month where revenue dries up, you don’t have to worry about getting evicted or being forced to pick up a side job that’ll take up too much of your precious time.
Additionally, if you ever want some extra cash to put behind an ad campaign or other expense, the option is always there.
Don’t have a car? There are a number of other options. If you have a marketable skill like graphic design or copywriting, Thumbtack and Upwork are terrific platforms.
4. Get others on board: If you can’t get talented individuals excited enough about your idea that they want to help make it a reality, then how do you expect to get consumers excited enough to buy it?
You have to have a team. It’s that simple. In the beginning, focus on finding people who can do the tasks you can’t do yourself. If you’re a spectacular copywriter but a lousy designer, find someone who can fill that void. If you’re having a hard time finding talent, consider using a platform like CoFoundersLab to discover potential team members.
Hiring interns to join your team (paid or unpaid), is another option worth considering when bootstrapping.
In the beginning, if you can’t design things yourself, you’ll want to have someone on your team who can. Perception is reality, and having someone on board who can make your brand look as professional as possible from the get-go is crucial to gaining the trust of customers.
5. Use crowdfunding: If you already have a prototype of the product you’re selling or a firm handle on the service you’re offering, crowdfunding could be an effective alternative to the more traditional methods of funding.
After you’ve created a compelling promotional video explaining your business, give sites like Kickstarter and Indiegogo a try when it comes to crowdfunding.
Starting a company with little financial support from others makes the already difficult job of entrepreneurship even tougher. The important thing is to be strategic with your time management and realistic in your execution.