Raising money from friends and family is certainly a common path to entrepreneurship, but it is far from the only.
My original point was that acquisition entrepreneurship could be an option for someone with a broad skillset like the OP. How I funded the first one doesn't really impact that as everyone will have a different path and I simply took the one that was available to me at the time.
If an existing path can't be found then it will have to be made. That could mean working and saving for a while, starting a side project with the goal of it becoming a profitable business, partnering with a friend and earning equity through sweat, etc.
You could look into startup grants and accelerators which can give you some funding up front and don't take equity.
With friends/family (and to an extent, banks) you can ask for a loan instead of a gift, with the idea of paying them back (or with interest, if they're needy friends or banks...). You can also just straight up ask for donations (food, shelter, live with family/friends) to get your thing up and going.
There's also "slower funds" out there for tiny projects if you look around. You can also shop around for angel investors who want something like a fixed revenue share for certain years, without "owning your thing" or "being on the board". But the more people you take money from, the more "needy people" you'll have to deal with, even if on paper they don't own a thing.
Pick where you get your money from, and pick your friends...
Raising money from friends and family is something I would not recommend. If the business fails you will have a lot of broken relationships unless the lenders have enough money to not care.
You can consider crowdfunding, raising from Friends and family, Government grants, Angel investors, or pure bootstrap. Whichever route you are taking (and you should consider more than one at a time) the key to success is talking to multiple people at once. This creates a buzz and a feeling that interest exists, pushing investors to act for fear of missing out. It really works.
My experience as well, until the first time I got funded.
After a success under your belt, it's easy to keep going and get more funding. There's no shortage of capital looking for people to fund right now (it goes through spells).
The first time I got funded, it was through a rich elite idiot's social connections (CEO). CEO was a sleazeball, and got all the financial and most of the branding benefit of the venture, despite doing no work. I launched a successful business with CEO as the figurehead, and in the process, I got:
1) Connections and network
2) Visibility and branding
3) Stepping through the process once. Moonlighting can be enough time if you're efficient (which you can't be if you're muddling through figuring stuff out)
It was a stepping stone towards financial stability, and I'm much closer. Socioeconomic mobility is a process. Some people get lucky, of course, but for the most part, there's a pathway from:
1) Unskilled labor; to
2) Professional labor loaded with student loan/mortgage debt; to
3) Financial stability; to
4) Being able to launch high-risk high-reward ventures
That's possible, but it generally takes a few generations:
* It's possible for someone without an education to send kids off to college through public schools, but they'll have a hard time competing with kids who were exposed to advanced tutoring, math, STEM, makerspaces, etc. from an early age (children of professionals)
* It's possible for first-generation professionals to network into power networks and achieve financial stability, but they won't be in a place to quit a job and launch a new venture.
* And it's possible for children of professionals to then (finally) engage in a few high-risk high-reward projects until one pays off....
Don't forget angel investors. Not easy to get, but then again neither is venture funding. You can often raise enough for a YC-style startup - I know an entrepreneur who raised over $4M from angels and no institutional funding.
The upside of this approach is that it may open other paths to success. A VC is likely going to push you to go big big big. Angels are more likely to be happy with a modest success.
Friends and family funding is indeed very common in startups and small businesses. Over 40% of businesses started from borrowing money from friends and family. The rules are very simple: 1) make sure they can afford to lose the money; 2) have a formal agreement and make it professional, set the right expectation, and communicate the risks upfront; 3) keep them informed on your business status, give them regular updates regardless whether it's a good or bad news. Even though this sounds easy, the actual fundraising process can be very tedious. You can get a lawyer to help you but that will cost you a lot of money. The best way is get use the tools online, like http://kickstarter.com, or this one http://trustleaf.com which is specialized in friends and family funding.
Thanks a lot! I also spoke with a friend who already received funding and we will simply keep growing our own way but also work with some lawyers who go out and find a buyer for the company.
A venture backed business is really hard to execute properly with tons of expectations. Lots of people have really basic ideas that they should just self fund or start small.
That "sounds" hopeful but I don't have any fund and know-how knowledge. I might go for entrepreneurship way but it will also require lots of preparation in terms of ideas, funds and technical know-hows.
most people capable of raising money have connections… buddies and social capital
i never raised money for my company. meanwhile a well known VC funded a competitor because of connections or because they like the founder’s “energy”. after a few years the company went bankrupt. the guy went on to raise money again. we had far superior technology far beyond what they were able to develop. it would have been cheaper to acquire us.
TL;DR most peole who succesfully raise do so because of different reasons than having a product or revenue.
He came up with the idea. Has no funding. He is a long time high school and college friend and the only person I know that wants to pursue entrepreneurship.
Except of course that most historical businesses outside of the mobile/social circle jerk have been started by people who had families.The take-home point here is you wont get funding unless you new VC owners can be sure of exclusivity on your life.
The problem with valley funding is its basically reliant on the tails of the distribution,without massive IPOs buoyed by hundreds of millions of users(not revenue!) it is not profitable.The truth is there is a lot of opportunity for businesses which dont go webscale.
Here is an idea,find a business as a consultant which has an opportunity in a growth industry (They still exist in a recession). Deliver your projects,go to meetups and parties. Take on larger projects from your customer and get some staff. Then look for new customers,building a business which has revenue in the low millions becomes possible and they if you want "webscale" you can bootstrap it yourself.The return on this business would be a joke to a VC but to you would be life changing.
The middleman approach to funding doesn't appear to work too well--none of the successful companies I know went that route, but many of the trainwrecks did. It's probably not impossible, though.
You would do well to remember that investors need you much more than you need them. If you've got a good idea, market, and team, raising money won't be your problem. Lawyers, professors, other companies, even networking events--it's a very solvable problem.
Fundraising is just about the least meritocratic part of startups. Depending on your social circle and markers of class, the process can be very easy or near impossible for a first time founder. For most, it's extremely difficult to get someone to invest in your company when you're still working a full-time job on something else.
> the one thing we want most in life is to work on our product full-time
Can you cut expenses and live off of savings for a few months? If not, can you self-fund it as a side project until it can cover your living expenses?
I'm sorry if I wasn't clear. I'm not against funding. It just seems like getting fund to start up, and then additional funding after you've launched seems odd. Sales, marketing, etc, should be covered with the initial investment. Needing more money just sounds like poor planning or foresight.
My product* has a huge inherent cold-start hurdle and it's not going anywhere without a funded launch. Unfortunately, the "team" is just me. Accelerators won't take solo founders, I've been unable to find a viable co-founder in my existing network (trust me, I've tried) and I won't partner up with anyone I haven't known for years -- too risky and investors don't like it anyway.
Given my background: proven engineer, "finished" product, long history of entrepreneurship (with some moderate success), solid resume and decent sales ability...
1. How difficult is it to raise money (maybe $250k) as a solo founder without big past successes? "Happens all the time", "nearly impossible" or somewhere in-between?
2. Does it matter that I need the funding almost exclusively for a launch? The only hire would be a launch specialist, possibly on a temporary basis.
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* http://www.words4chrome.com
A friend of mine raised $500k+ by himself outside a major tech hub. However, he already knew these investors well and they're local-yokel D-listers I wouldn't take money from anyway.
we never raised money. over time i found out investors have a million ways to say no and that your business or product matters less than who you are and if they know you. i thought a good product and business would be enough. i saw idiots left and right raising millions for stuff like razor subscription businesses. they were able to do so because they knew X or Y for many years already. as a founder/engineer i had no time to go to parties and spend all my time in powerpoint making pitch decks. it becomes a full time job. no time for that if you are building a moderately advanced product with a small team. we tried accelerators (you know which one that includes) and we came to the conclusion that knowing people is what makes the difference. it always comes down to that.
to lower the stress: think about what is missing and how you can hack the process. if it feels too hard you should probably find another way.
My original point was that acquisition entrepreneurship could be an option for someone with a broad skillset like the OP. How I funded the first one doesn't really impact that as everyone will have a different path and I simply took the one that was available to me at the time.
If an existing path can't be found then it will have to be made. That could mean working and saving for a while, starting a side project with the goal of it becoming a profitable business, partnering with a friend and earning equity through sweat, etc.
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