Launching a Start-up – How Much Money Do You Really Need?

There is one very important thing every entrepreneur needs to keep in mind – this is the life you chose, it is in your nature to act in this manner. So, never allow yourself to say – I can’t because I don’t have the money. This may not be something you want to hear, but it’s something you need to hear. The proper funds are just around the corner for any business that has a good idea, or that can provide adequate services and goods. You just need to know where to look, and to invest the right amount of energy to actually start looking.

Your approach to funding should focus on raising as little as possible (so you can start sooner, and have less to give back), but still enough that you can, of course, accomplish what you need, with some extra leeway. Trust us, the idea of “I will get as much as I can, and then send back what I don’t need” won’t work. You will find a way to spend this money, just like you will find a way to stretch your budget and make do with less.

A strong start

In order to achieve the results you want, you will, unfortunately, have to get a lot of things ready at the very beginning. Before, it was enough to think of a prototype, get it set up, test it with consumers, and then start again if you have to. It’s the other way around now. You have to go into detail on figuring out the minutiae of what your target demographic wants, what they focus on, and to act in line with the market. This is vital since the last thing you want in this intensely morphing market is to spend weeks on something new, only to have it become useless once the market shifts. So, your first step is to validate what the market wants and needs, and to then act in accordance with your new data.

The next thing you want to focus on is to push hard and push fast. Did you get money for 12 months of work? You need to get your job done in 8. Always hope for the best, but plan for the worst. And while you are working, you need to keep an eye out, you need to shift and move, to shuck and jive against the market.

No baggage – quick and easy

When you start raising money for your company, when you are just acquiring funds to get things going, you need to accept and to stick to a specific system. Namely, we are talking about going in as lean as possible, with minimal baggage. Imagine you’re in a race car – you have no baggage, minimal issues or weight on you, you want to go forward fast and quick. This doesn’t mean you don’t have to do research – you need to spend months talking with buyers, suppliers, lawyers that specialize in trademarks, right down to business purchase agreement solicitors, just in case. By quick we mean – what you don’t have to do, you shouldn’t – don’t procrastinate.

Figure out how much you need, figure out what your minimum costs are, set your goals and stick to them. Murphy’s Law is real, and it will strike when you least expect it. Keep some emergency cash handy.

Namely, this no-baggage focus means you will develop good habits for the future and will help you maintain discipline. You will learn how to handle yourself, and how to not spend money excessively once you start turning a profit. The road to success is strewn by start-ups and companies that have had excellent initial funding, and that have squandered it all once they relaxed and started making serious cash.

Rich uncles and aunts

There is this, not undeserved, opinion that many entrepreneurs had their start with a rich uncles or aunt’s money. But, here’s the deal. Sure, you can loan money from friends and family, but are you one hundred per cent certain you can deal with the drama that comes with it? You will probably be on the brink of burnout already, you don’t need the extra stress. There is a hot debate on what’s worse – somebody budding into your business who kind of knows something about companies or somebody who knows nothing at all? The former has a level of confidence (arrogance?) that simply can’t transfer onto a field they are not familiar with, no matter how much success they have. And the less is said about the latter, the better.

On the other hand, if you go with, let’s say, an angel investor, you get good advice, maybe even some deserved input, all the while followed by experience or research. You will also gain access to a network, and to a world that you might not have been able to access before. A good investor knows enough about the field to trust you to do your work. There are always exceptions to this rule, but you should still keep it in mind.