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Summary:

This afternoon, as I was preparing to have coffee with entrepreneur “Wil Schroter”:http://www.gobignetwork.com/profiles/Wil-Schroter.aspx, whose “previous Found|READ post”:http://gigaom.com/2007/07/03/stop-hiring-people-to-do-your-job/ you may have read, I ran across a great post on his site called “Five Ways to Move your Startup Forward without Cash”:http://www.gobignetwork.com/wil/2007/7/10/five-ways-to-move-your-startup-forward-without-cash/10175/view.aspx. As described, the piece has useful […]

This afternoon, as I was preparing to have coffee with entrepreneur “Wil Schroter”:http://www.gobignetwork.com/profiles/Wil-Schroter.aspx, whose “previous Found|READ post”:http://gigaom.com/2007/07/03/stop-hiring-people-to-do-your-job/ you may have read, I ran across a great post on his site called “Five Ways to Move your Startup Forward without Cash”:http://www.gobignetwork.com/wil/2007/7/10/five-ways-to-move-your-startup-forward-without-cash/10175/view.aspx. As described, the piece has useful tips for how you can get your business off the ground without falling into that particular trap of hesitation that keeps so many of us from doing what we really want to do: the fear of not getting funded.

*As Wil says in Tip 5:* “When you write a business plan with the idea of getting funded in mind, you tend to think … ‘if I get funded, I can start.’ Try writing a business plan that involves zero funding and begin putting your milestones in place for that company.”

Your odds of success, Wil argues, will be higher if you get going before waiting to get that cash that you think will make founding a bit more comfortable. I think Wil is right: carpe diem, in a capital sense, is what this philosophy boils down to. *While the tips might seem obvious, we can all use reminding that there is always something we can do, each and every day, to advance the ball whether we have cash in the bank, or not.*

His other tips include:

*Tip 1: Do all the setup stuff now.* It costs next to nothing to incorporate, setup your bank accounts, draft your partnership agreements, find your hosting provider,

*Tip 2: Start recruiting.* You don’t need to wait until you have money to recruit talent. At the very least you can start having a coffee with these people and get the conversation going.

*Tip 3 Work on the product yourself.* Even prototyping the product as best you can without cash is a big deal.

*Tip 4: Talk to prospective customers.* Sure, you don’t have a product now, but that’s no reason to avoid talking to customers. Even if all you have are prototypes or a general concept for the product, the faster you can get some real customer feedback the better.

Please read the full text of Wil’s post “here”:http://www.gobignetwork.com/wil/2007/7/10/five-ways-to-move-your-startup-forward-without-cash/10175/view.aspx. And check out his site –” TheGoBIGNetwork”:http://www.gobignetwork.com/, it is another great resource for founders of startups.

  1. Great advice and Wil’s blog is a must read. I like tip 3 a lot.

    When we were first pitching for money, the primary founder, JP, had made these great click-through models in PowerPoint using animation triggers. On one slide, a user could experience an app before any formal specs had been made.

    It was a great way for potential investors and customers to experience the concept without having to develop anything.}

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  2. To Matt’s point, our approach to rapid prototyping was designing our product on MS Visio and bringing it to life in PowerPoint using some nifty features. It helped us identify usability flaws early on and we went through 3 major design/interaction concepts with Convos. This combination was really compelling for us and everyone thought this was the real thing in use. When people asked, “Is this Convos?”, we just smiled and said, “It can be.”}

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  3. Honestly it drives me crazy that anyone tries to start a company by writing a business plan and shopping it for funding. In this scenario your BEST outcome is to get diluted into oblivion by your investors. What’s the point? To end up essentially working for someone else? Isn’t that in part why we’re entrepreneurs in the first place? So we don’t have to live that traditional life?

    If you don’t have money of your own, beg and borrow from friends and family. You don’t need much, just enough to start doing what it is you propose to base your business on. Then if you need to you can raise money from other angels, VC, whomever, with the confidence that you actually have something of value.}

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  4. adambenayoun Tuesday, July 17, 2007

    Daniel Gibbons is right:

    From my own experience at *Octabox*, when i first came up with the idea and talked to my partner, we decided not to go after any potential investors, since the only thing we had was an idea and:

    – We had next to no experience in developing a startup (or some but not enough).
    – We didn’t have a working product to confirm we have a market and a clear proposition.
    – We didn’t have the right team yet since we were just fresh.

    We came to these conclusions (some may not be right for your business, but i feel like they are for us):
    – *No Business Plan*: Don’t start by writing a business plan, a short executive summary and a presentation is what people will look at or read. If you can write clearly about your idea in 2-3 sentences then you are good to go, business plan should be a mashup of documents you wrote to explain different side of your company. Personally I don’t think anyone will ever read your business plan, maybe when VCs do their Due Diligence (?).
    – *Registration*: We went to register our company and went to a lawyer from day one, they usually charge less when you’re just 2 guys in a garage developing a prototype.
    – *Start from Day one*: And we don’t mean start prototyping your product because this should be *CLEAR* that developing your product is a must. But when we registered our company, we defined *Octabox* as a separate entity than *Lionite* (Our design firm), since we started to take gigs in consulting and designing medium and large scale web application. It helps you tremendously, as it give you a big influx of money and let you start hiring people from day one, it gives you experience and let you to know how your team works and execute. _Some may say that it could take the focus out of your product but your main job or anything else that let you bring money to your table in order to develop your product will take that time anyway, so what do you prefer? Developing and consulting when both will bring you some experience/feedbacks so needed or Waste your time?_
    – *Bootstrap your life*: your startup is at this stage that everything that happen in your life will be reflected in your startup, if you live an expensive life and can’t afford to put some money and time in your startup instead, my best advice for you would be to check if this is right for you. Usually when you have a good idea and want to develop it, you have this _scratch_ to leave everything, cut down your expenses and put all the budget and time available on this idea. That’s right: it’s your baby.
    – *Hire people* – i would say do more than sit on a cup of coffee with your developers. Hire them for ridiculous amount of money, when we first looked at a developer at the market price, we found out that they would be a lot of people willing to work for us for high salary. They were off the budget and I don’t think they really understand what we were looking for, I told my partner that sometime it’s better to hire someone with 0 experience and little knowledge and that the true things that matters are: trust, ability to learn, ethics. This will not only let you learn to how to handle human resources before getting investments but also let you grow the people you need and want. People will less experience and knowledge sometime tends to be more loyal to your business and enthusiastic.

    An anecdote: Yesterday we sat down with one of our developer we’ve been employing as a freelancer. We proposed him a monthly salary (still low salary) in return for more of his time and dedication. He was a little bit surprised since he said he has little experience and knowledge (The fact is my partner is really happy with his work and say that he’d catch up to the level we need once we get funding) so how comes we’re hiring him and give him more responsibilities? I replied telling that this is my first time CEO of *my* startup and this is my first time that I will try to raise funding, Will it stop me being successful? Hell no, i have this feeling deep inside that I’m doing the right thing. Every employee should get his chance, and if you have no money, then it would be better to hire someone who cost you next to nothing for 6/12 months than hire someone expensive for 1/2 months. Think about the learning curve.}

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  5. You don’t need to raise money. I’ve done three startups and the more money raised the worse they turn out. In my best company we worked for two years with no salary and no offices. We figured out that we could live without raising money and we didn’t bother. When sold it returned the partners over $10,000:$1 on the small amount of cash initially invested. If you can’t live on less than $100K salary, a real startup is not for you. Go get a cushy corporate job and make someone else rich.}

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  6. theunknownfounder Wednesday, July 18, 2007

    I’ve been an entrepreneur for many years. I’m a technologist, marketing and product designer, more than a business guy. For example, until recently I had very little idea what Series A funding was and how it differed from seed funding (Thank you Found+READ for valuable educational materials!). My last enterprise is still going and I’m very proud to have survived the dot com meltdown, though it has taken it’s toll. My fellow small company execs often ponder where we’d be (re: how close to an exit) if we had started our business today instead of eight years ago.

    One of the reasons we were able to survive was because I absolutely insisted on doing everything on the cheap. We bought used desks and chairs, when my colleagues were buying the iconic Aeron chairs. We occupied low rent offices above a bar in our mid-west town when others were sitting in (soon to be vacant) prime office space with panoramic views of the city. Luckily we had an incubator eating the costs of accounting, HR, etc. But at the time expensive bandwidth, servers and development tools were the price of doing business and ate up a lot of our budget. We’re still paying much more money than I’d like in Microsoft software licenses today, but the cost of re-engineering our product to run on lower cost alternatives is prohibitive.

    A couple of months ago I decided to start yet another enterprise. The biggest factor for me in this decision is how inexpensive one can create a start-up these days. I was inspired by Guy Kawasaki blog on how he started Truemors for $12,107.09 and my own research into the maturity of open source development tools like MySQL, Linux and PHP. I started a blog (a very new thing for me) and am keeping track of every red cent I spend on developing my business / product. I’m going at this project much more from a CTO perspective than a CFO… but if the product is excellent, my experience is that the money will follow.

    This posting (Zero-Cash Plan) and the following post by Adam (A Zero-Cash Case Study) further justifies my feeling that the barrier to entry has become extremely low if you know where to find the resources that are out there. Thank you to everyone who are sharing their bootstrapping experiences!}

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  7. I think all the comments above are very valid. Remember that VERY few businesses ever get VC funding — but this does not mean the business is not worth starting. That being said you do want to put together a plan. It does not have to be a 30 page VC ready plan, but it should outline you main product/service as well as how you will market it. The process of putting things in writing will help you set some goals and milestones that will then help you implement your plan and be successful. the other important part of a plan for internal use only is the financial section. You will want to do a forecast, and budget expenses to get an understanding of cash flow, and potential credit needs BEFORE you start.
    According to an AT&T study, more than 60% of businesses that fail were profitable, but CASH FLOW NEGATIVE.

    A plan that is written as a road map to reach certain goals and objectives will guide you through the first year of your business and make sure that you have all the knowledge you need to make the right decisions.}

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  8. I went the massive “credit draws/BP route” before and am now using the “no funding/build customer base one-by-one” method this article details to pay the debt from option 1.

    I am now spending more time getting customers and making money than I was spending money and making what looks like a business.

    Funny thing is, it took the cash plan to happen before I felt confident enough to aggressively attack with no-cash.
    I am odd like that.}

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  9. I really don’t get the business plan system, you’re a startup and being that small and dynamic, you’re adapting to the market very quickly.
    you’ve probably made so many changes to your business than you won’t even remember what was your initial idea.
    Now, everytime you’ll change your business, you will have to revise your business plan and change other document accordingly.
    What I was thinking about is to write several documents which should fully cover your business. Have 5-10 documents, each one “attacking” one side of your business, make them right to the point and relatively independant. If you ever need to change something, you’ll have to update only 1 or 2 small document, usually when people will ask for a business plan, all what they’re interested are a specific section in the Bplan. If you pass them with this specific document rather than a full and boring business plan, they will have a better read and probably will want to know more about your business.
    my 2 cents.}

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  10. theunknownfounder Thursday, July 19, 2007

    My business plans usually consist of a single spread sheet. After being an entrepreneur for a few years, you get a good handle on what things costs (engineers, sales people, office space, servers, etc.) I guestimate as many of the numbers as possible… then multiply my costs by four and divide my revenue numbers by four. If it looks like I can still turn a profit, than it’s a green light… otherwise there are plenty of other good ideas out there. It’s amazing how many time you hear about a company that got started by people who were passionate about the product but didn’t realize it would cost ten times as much to develop/manufacture/market the product than what they could possibly sell it for.}

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