Bootstrapping and Alternative Sources of Funding - Entrepreneurship 101 (2013/2014)
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Transcript of Bootstrapping and Alternative Sources of Funding - Entrepreneurship 101 (2013/2014)
So you’ve got a great (validated!) idea, tested your business model, and you’re ready to launch your new startup…
Now you need money (and lots of it)!
Bootstrappers’ Hall of Fame
• Starting a business with little capital or formal investment""• Using your own finances (savings, credit card, loans) or
‘friends, family and fools’""• Selling your time/expertise on the side (consulting)""• Selling an early product to fund company development""• Leveraging other sources of funding (government grants,
crowdfunding)"""
• Bootstrapping is the only option for companies that won’t grow quickly or provide a significant ROI to investors"
"• Even companies who will get investment later may need to
reach certain milestones/levels of traction on their own first""• Some entrepreneurs choose to bootstrap to maintain
control/full ownership over their company"
• Forces you to focus on priorities and leverage what you have (time, expertise, money)"
""
Start-up capital is NOT the leading predictor of success: ""• Companies started with <$1000 as likely to be profitable as those
starting with >$100K""• Companies launched with <$10K achieved almost as rapid a
median growth rate as those that were loaded with start-up capital before company’s first sale"
But size affected: ""• Companies with >$100K seed capital employed on average 150
people and had $21M in revenue; <$1000 seed capital had 56 employees and $13M sales"
"
• Keep overhead low!• Share office space or work from home"• Use QuickBooks, Wordpress. etc. and other affordable technology solutions"• Low fixed costs; keep costs variable""
• Leverage relationships!• Tap network for discounted services/deferred fees"• Use advisors and mentors"• Find employees who will share the risk (and upside)"• Leverage suppliers to only get paid when you make money"• Paid product development: customer that needs your solution badly""
• Do-it-yourself marketing and hiring!• Use interns and contractors to keep costs flexible"• Pay commission-only for sales people"
"• Money management!
• Line up credit before you quit your job"• Look for service opportunities related to your business"• Focus on sales not just product development""
• Pick the right business (short selling cycles, recurring revenue)"
"
A search tool on the MaRSDD website to help entrepreneurs connect to more than $30 billion in 4,500 government funding programs
• $26B in grants and $4B in tax credits. "• Average grant size among the top 500 recipients is about $1.8M. "• About 1.5% of grants are over $10M"• 76% of grants are paid to companies and about 95% of these are paid
to SMEs"• 28% of recipients are based in Ontario "• Top sectors are manufacturing, media, and tech""" "
marsdd.com/funding !!
• Kickstarter: Passed $1 billion in pledges from 5.7m people in 224 countries; Canada: 1400 projects had $44m in pledges raising $14m"
" PROS CONS
Validate an idea Lots of failed campaigns
Pre-‐sales/Sell first product Launch too early
Build market awareness UnderesFmaFng cost of fulfillment
No equity
Wrong price point
Works well for NFT/arts ventures Wrong product
Pg 13"
The Crowdfunding Success Pattern!"Learn how your startup can leverage and maximize crowdfunding from Brian Meece of RocketHub. "
Crowdfunding Change: Tips and tricks for social innovators from Indiegogo!"Amy Lesnick, Head of Social Innovation and Non-Profits, Indiegogo, discusses how crowdfunding has become a transformational tool for social innovators.""