After working for a funded start-up I gained many valuable insights. One of those was a better understanding of how new businesses get the money to pay the bills. I have met powerful investors before and big donors to non-profits, but few of them impressed me. This is not to say that investors are not a wonderful thing for start-ups. However, with investors comes additional management. If I was an investor in a company, then I would probably want a say in how some of the operations are run – which is why I do not fault investors at all. It’s the relationship and the process built around it that can often go off track and make things…mucky.
Let’s dig deeper into this concept. If I want to start a new company and I need $50k to get things going, then I will do a few things:
- Go through my own financial statements to see what I can contribute
- Breakdown how and when the money is owed, and to whom
- Make a decision about how I will finance the idea (investors, bank loan, grants, crowd-funding, bootstrapping, etc)
No matter how I decide to fund my business, I need to have a clear plan and relationship with who/where I am getting the money from. Investors and banks need you to be very honest, clear and detailed about what you want from them.
- How will the relationship work?
- What is their stake in the company?
- Is there an end date?
- Why do they want to help you?
Grants, crowd-funding and bootstrapping take on a whole other level of finesse. These folks want to know more about you, the person behind the idea.
- Why should they choose to help you instead of someone else?
- What social good are they making by working with you?
- How will they be involved in the process of developing this business?