Let’s talk about funding. That pesky little nuisance. Now, I’m not going to go into how to get funding. That will also depend on the type of startup and where you’re based, but let’s talk about general considerations. Opening a startup is a risk, and it’s an endeavor, so before you plunge yourself head first take some time to consider this question: how are you going to fund this?
There are many ways of funding such as angel investors, VCs, crowdfunding, bootstrapping (self funding) and more. Each path has different considerations and more often than not, reality is, well, a messy mix. The first part of a startup you’re always going to have to fund yourself. Maybe special rock stars get funded based on a vague idea alone but that’s not for us commoners. Good news is, you can usually start on that very initial stage of research while still keeping your job. It’s not easy, especially if you have kids. I mean, if you have little kids you can barely hear your own thoughts for most of the day, how the hell are you supposed to find time to do this in addition? But if you find an idea you’re super passionate about, and that strong drive to create it, you’ll find the time.
You could move to working part time, you could quit your job, you can do this in parallel, or, if you’re a stay at home mom, in those blissful quiet moments. Whatever you choose there will be a price to pay so take the time to consider this carefully. Do not risk everything on this. Don’t take a loan you cannot repay. Don’t spend your entire savings, leaving yourself with no safety net. Don’t sacrifice all the time you have with your kids, cause honestly that time will never come back. The harsh reality is most startups fail. You need to look this reality straight in the face and make your calculations based on that.
Most investors will not give you the time of day if you are not working on this full time. Their reasoning is if you’re not willing to risk it, why should they? That might feel a bit disconnected but it is what it is. You’re going to have to figure out how much you can spend on this. And what you’re willing to sacrifice.
Working on your startup in parallel with a day job makes a lot of sense, and I know people who do. Yet not all of us can. I did not feel I could split myself in that way. After finding an idea I’m passionate about and doing as much as I could to promote it in parallel to my job, it was time for me to take a hard look at my savings. Being a single mom there’s no second salary to rely on. Here are the questions I asked myself:
- How much of my savings I can spend without being (completely) reckless?
- What are my expenses going to be?
- For how long will this amount last?
- How much can I realistically get done within that time frame?
And I gave up my dream to buy my own house for the time being. I knew going in that this meant I will not have enough for a decent down payment and, what’s more important, no bank will give me a mortgage when I don’t have income. I can’t say it was an easy decision but I’ve made it wholeheartedly. I believe that if this fails, I could easily find another job (granted that was before coronavirus, but that’s for another post). So what I’m sacrificing is a part of my savings, and the ability to buy a house now. And that’s a sacrifice I felt comfortable making.
So make your calculations and check what you’ll be sacrificing carefully. And remember - everything is going to take much longer than you expect. That is a universal truth. So when you make your financial calculation give yourself wide margins. Take into account there is such a thing as raising too early or raising too much, make sure you have enough space to make a level headed decision.
I hope this post did not deter you. Like I said in my previous post, building a startup requires such an unlikely balance of stubbornness and being realistic. So don’t get discouraged even if now is not the right moment. It doesn’t mean it won’t be later. Whether you plan on getting external funding or to bootstrap until you are profitable, know that the road will be long and plan accordingly. Don’t dive into this thinking money will magically appear. Make a financial plan and forge ahead.