How to Create Startup Capital
Well, not exactly but it come close. Think of it as an indirect endorsement. Big name east coast venture capitalist Fred plugs one of the many financing methods elaborated on The Smart Startup Guide. It would have been better if he had mentioned the creative financing manual by name, but I’ll roll with it anyways.
Customers are a great way to finance a business for many reasons. First, customer financing is typically non dilutive. They want something from you other than equity in your business. Customers also help you fit your product to the market. And customers will help debug and improve the quality of the product. An early customer will give you credibility with other customers. And an early customer may spend more with your company down the road.
As I’m well known for saying, entrepreneurship is akin to a 25-level computer game. If you all you can think of for financing your startup is, “Gosh, I’ll write a business plan and hope that a kind stranger gives me his hard-earned money,” you’re stuck on level 1. There are a number of serious problems with this situation. You can’t make any progress because you don’t know how and everyone else can see that you’re basically clueless about what it really takes to get a company off the ground. The result is that they shun you.
Want respect and capital from the business community? First, show people that you know how to move your company through the financing valley of death using techniques like the ones Fred describes in his article. Once you have passed the most basic of entrepreneurial tests, respect and money start to accrue.
Thanks to Fred Wilson for helping to get these ideas better known by the public.