Drop and give me 20!
Raising funding is a painful and humbling act.
An opinion from David Farmer | CEO of Ad Giants
If you own a business or ever started one, we all know that working capital is the first hurdle we all must clear. After the excitement and passion of your new venture settles, the reality of "what it takes" to start or run a business quickly sinks in. And that alone is often enough to keep 90% of people from taking the step-off the ledge to go for it.
For those who do take that leap of faith, your brain immediately kicks into options-mode, filtering out the fastest, most beneficial way to find the monies you need. Very few of us are born into money or have relatives that have enough cash laying around that tossing you $100k isn't a big deal. Especially given the times we're all living in today. You'd have an easier time cramming a lump of coal where the sun don't shine and trying to make a diamond! That being said, what are the options most people face, and which ones are a potential fit for your business and goals?
Where to potentially find money and how:
Family & Friends
Probably the most common first step for anyone you've seen on Shark Tank. But as we just stated, most families aren't loaded, so now what. Well, perhaps THEY might not have the funds, but WHO DO THEY KNOW? Six degrees of Kevin Bacon rule of thumb. Everyone has a friend with money, spiff your family member with a few shares of the new company for endorsing you forward!
So, what about friends? Look back in your memory all the way to your childhood. Grade school, high school, surely someone from your past who "liked you then" was successful. And if they won't invest, again, WHO DO THEY KNOW WHO CAN? You'll be shocked at what you can discover once you set your mind to it!
Lastly, do your family and friends a real "solid." If they're willing to invest in you, take the money knowing you damn well better deliver, and give them a fantastic "sweetheart deal" for believing in you. Giving generously in and of itself is good for everyone. Live by that rule!
No. They're ruthless bastards who could care less if you succeed. They just hold out their greedy hands no matter what. Pay me back! Ugh...
Shark Tank has created a mentality in entrepreneurs that raising money is just like the show. It's not. That's entertainment. When you seek an audience with professional money, VC's, etc., the information they'll need to see is complex, involved and costs quite a bit of money to pull together properly. PPM's (Private Placement Memorandums) LOI's (Letters Of Intent) Operating Agreements, Business Plans, Cap Tables, all of these are necessary to even get their attention, and that's before you even meet! So, if you're an existing business with positive revenue, go for it. If you're just starting, this is going to be a frustrating, time consuming, and expensive option.
Your Own Pocket
This should probably be option one, but it's way down here because unless you're flush with cash, have a total buy-in from your partner (if you have one), or you're willing to lose it, don't do it. This forces the elephant in the room question...starting a business isn't for the faint of heart or something to "try" just because others do. It all comes back to your certainty, your expertise in whatever space your business idea lands. If you're not totally convinced, haven't vetted the idea with people you admire who would be a great judge, then don't do it.
Taking money from others is serious. These people work very hard for their money, and you should ALWAYS treat those monies as if it came from your own pocket. This comes with a heavy responsibility, honesty, accountability, transparency, knowledge, and a work ethic to choke a horse. If you aren't someone that people can look at and immediately admire because you're a freak workaholic, then keep your day job.
NOTHING IN LIFE IS EASY IF YOU WANT TO GO ALL THE WAY! Don't half-ass one single thing, and if you still think weekends and evenings are here to relax, again, back off becoming an entrepreneur! Your life will become your job and your job is your life. That's not a bad thing either. So do something beautiful, meaningful, fun and good for others.
Every business has potential partners that your business model might appeal to so they can grow from your success. Create a two-way success story and reason they might help you. Either with funding or customers. Getting in bed with strategic partners as early as possible is hands down something every business neglects and shouldn't overlook.
Times today have changed and effected us all. Business isn't remotely like it ever was. It's harder, faster and most often, a lot dumber. Be prepared to kiss a ton of frogs, a ton! Business protocols and business ethics are for the most part gone. People who deliver on what they say they'll do is not common place anymore, it's as rare as a white crocodile. Do what you say, always deliver, and be the guy that preserves the legacy of what it means to be an upstanding business person. That alone is reward in and of itself!