Do You Have To Put Your Own Money Into Your Startup?
We needed to raise money, lots and lots of money, right of the gate. The money we needed to raise ($11M) wasn’t the kind of money that most people have laying around.
I sure didn’t.
But there’s the reality that even if you need lots of money, you’re going to end up putting your own money into your company before investors do.
I know there are outlier cases where companies are instantaneously funded. But, for the rest of us, there is an incubation period where you are self funded or bootstrapped.
Sometimes the period where you are self-funded can be small; maybe just a few months. Sometimes that self-funded period can be really long; in our case it was over two years.
You need to be prepared to self-fund, at least for a while.
The smartest thing you can do is make sure you have a plan of what you need to do to get outside funding. Maybe the outside funding comes from your friends and family. Maybe the outside funding comes from angels. And maybe the outside funding comes from VCs.
There’s a lot you’ll need to have ready to get outside funding including:
A. Your plan.
Having a plan of what you need to do will give the direction and focus that’s necessary to get your outside funding. You’ll know what the milestones are that you want to achieve, and you’ll know what milestones you expect to achieve with your funding. And…
B. Your team.
Who are you going to bring onto to the team, and what functions are they going to fill.
Some of these people may be cofounders that join you before the funding. Some of these people may join you after the funding.
C. How much money you’re going to need to get to cash-flow positive.
Yes it’s early. And yes, your plan is likely to change. But you should still have an idea of how much money it’s going to take before you don’t need any more money.
You may not raise this amount all at once. That’s normal. However, it’s good to know how much you think you’ll need.
Your friends and family may not ask you how much money you need to get to cash-flow positive, but expect professional investors to ask. More importantly, you should know how much money you think you’ll need.
The period between getting outside funding and self-funding is where the foundation of your company is built.
When I look back, all of the things that came after our funding started with the work we did before we were funded. We built the founding team, and we had our plan set and ready to go. Then we hit the ground running after the funding.
You’ll likely find the same thing in your case too. Use the time before you get funded wisely, and you’ll see it will pay off big time after you get funded.
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