Career Key

Author: Career Key's President and CEO, Juliet Wehr Jones, GCDF, J.D.

Thursday, May 1, 2008

Getting Startup Money is a Pain in the ...

Having talked with a few people "in the know," I hear this feeling is not unusual among would-be entrepreneurs or self-employed with that hot new business idea. It is also true. So how do you get the money to get started as self-employed or an entrepreneur?

I know there are websites, blogs, and books devoted to answering this question. Some of these advice sources also contain a lot of "rah rah," pie in the sky, worshipping at the altar of the idea of entrepreneurship without addressing the practical difficulty of raising money.

When doing research myself for a business idea, the answer was pretty straightforward and I'm happy to share it:
  • You need to fund it yourself, either through savings, borrowing against assets, or contract/paid work you do while starting the business. And if you can't work at the same time as startup due to conflicts of interest or time constraints, or you don't have savings, then you need to try other options.
  • You need to find "angel" investors, either family or friends or business contacts, to give or loan you the money. Forget bank loans unless you've started businesses in the past (successfully).
  • Venture capitalists want to see a prototype of your idea. If it takes money to develop that prototype, you need to rely on yourself or your angel investors for it. No prototype, you can forget VC funding.
  • Getting VC funding is difficult, takes a lot of time and effort, is risky (of your idea being hijacked if it is good), and you give up a significant amount of control of your business if you are successful. And you need to know people to start the process - have trustworthy business contacts.
  • If you do have access to money, whether you are blessed to receive a gift from family or can borrow from a retirement asset (God forbid), make a good decision about whether and how to use it.
  • Bottom line, you need to fund the beginning stage of developing the prototype yourself or borrowing money from friends or family. If you can't muster that initial funding, then you can't act on your idea.
And I won't charge you $24.95 for this advice - which I know seems pretty bleak. It was a little depressing to me until I realized that it is nothing more than saying, you need to be creative, realistic and keep your "eyes open" in this process. However, there are plenty of success stories out there, so people figure it out. We've developed a list of website resources (NOT put together through reciprocal linking or paid sponsorship) that can help. Nobody ever said it would be easy - but it's worth it.

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