What methods of financing your startup have you considered? Make sure you're considering all your options with our innovation guru, Pam Banks.
The initial internal source of funding for a start-up is called bootstrapping that is relying on internal sources such as savings, loans from family and friends and early cash flow. An important part of bootstrapping is knowing which ideas to follow through with and at what stage.
Many entrepreneurs continue with a day job or moonlight as consultants to make ends meet. If you are cultivating a side business avoid biting the hand that feeds you:
Check your employment agreement and employee handbook. Some companies have a no-moonlighting policy or non-compete agreements that prohibit you from doing your own business with their clients.
Don't work on your startup on company time.
Don't burn bridges.
Entrepreneur move forward with a modest budget and fund the venture from savings, or line of credit. They invest their time and energy or sweat equity into the business. Some Entrepreneurs will even go as far as re-mortgaging their house, selling discretionary assets and reducing their personal household cash flow. The risk and reward of these personal sacrifices is significant as the Entrepreneur is on their own and in many senses "All In".
After all personal funds are exhausted and assuming the idea has merit, the Entrepreneur will next approach their family and friends for love money. This is usually one of the key tests in the Entrepreneurial venture. "You are personally attached and deep into the project – will your immediate family and neighbors see the potential and trust you with their cash?" There are lots of stories of family rifts that were created by "loaning cash" to the brother in law – never to see a dime in return! Most Family and Friends investors are interested in capital preservation and a modest return on their investment.
An important point to note is that success stories do not happen overnight and no one expects you to open up a new venture in an instant. So the path to your success is always slower than you expect. The RIC Centre's entrepreneur in residence can help you plan your business start-up.