Principle 11: Get Traction. Get Action.

Finance & Funding

What are my investment and finance options?

Why is this principle important?

The cheapest way to fund a business is via revenue. The most expensive way to fund a business is via equity. Early-stage investment may seem like money for nothing but it’s not. Every business has different funding requirements, make sure you choose the right one for yours. Remember, if you do decide to fundraise it takes time and effort – which could be spent building your product and finding new customers.

What should you focus on at this stage?
  • Explore creative ways of covering your startup’s main cost (you).
  • Learn about the many different ways to fund and grow a business.
  • Understand the key steps required to raise external investment.
  • Understand how valuations, shareholders agreements and term sheets work.
Core Concepts

Understand your options

Fund yourself creatively and by bootstrapping
This is a great way to test how much you care about your startup – by asking those close to you for money. Be careful, there are always strings attached and the emotional ones are often the hardest. Ideally you fund the initial version of your startup yourself.

Raise via pledge-based crowdfunding
Spend 1 hour on Kickstarter, Indiegogo, Crowdfunder or any reward-based crowdfunding platform (there are hundreds) and you will be blown away by the kind of ideas that are being (over)funded. The key to successful reward-based crowdfunding is the same as building a startup: great story, product or service that helps people have a better life and the beginnings of a tribe of fans.

Raise via equity-based crowdfunding
Give away a slice of your (un-valuable) business to the crowd. Expensive in the long-run as your startup should increase in value. But a great way to grow once you have traction. Just ask Escape the City!

Raise via debt
Again, not something you want to do without serious consideration – you’ll have to pay the money back. But small debt financing through startup loans is a lot easier and less risky than the past.

Raise via angels or VCs
A more challenging route before you have proved traction with your startup but good if you need larger sums in the early stage. Reputation as well as a killer pitch is going to be key to succeed down this route.

Your Questions

Join The Tribe Forum for Q&A on the Finance & Funding principle.
http://tribeforum.escapethecity.org/c/the-startup-zone/11-finance-funding

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Tools & Resources
Crowdfunding
Further Information
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