I have often been asked, “What is the most challenging hurdle for building a successful business from scratch?”.
THE HR consultants say, “hiring and retaining the best people”, and the truth is that truly talented people are at the core of most successful ventures. An engineering consultant may say, on the other hand, “The key to success in great technology”, and yes, technical innovation has been at the heart of so many really successful garage-to-world domination enterprises like Facebook, Google and Uber. But for every successful invention there are at least ten that never make it out of the garage. Then, if you ask a venture capitalist, they may venture to say that the real challenge is developing a solution that fills a compelling worldwide market demand.
But if we’re looking at this from an entrepreneur’s perspective, in most cases the biggest challenge is sourcing start-up funding that will pay the people to build the technology and others that will market and sell your solution to the world. After all, if you can’t pay people to do all that is needed to develop, market and sell your product you simply won’t get very far.
My advice, then, is to always focus on funding and never take your eye off the ball. The best time to pursue your next round of funding is the day you close on the current one.
So, as an aspiring entrepreneur, where do you start? Is there a particular sequence of steps to take in sourcing funding?
While the answer to this question varies upon the business and the people involved, it is safe to say that most basement businesses start with the resources of the founders, move on to tapping into family and friends, sprinkle in some bank or other debt financing, seek out angel investors or strategic alliances partners, move on to venture capital and hopefully eventually, tap into public markets as both a financing mechanism and an exit strategy. In reality, it doesn’t always happen that way.
Some companies skip one or more of these steps and some are fortunate enough to drive sufficient operational revenue to avoid most of these steps. The common theme, however, is that obtaining cash is the key to success, and finding that funding is usually a daunting challenge. In future blog posts we will explore the pros and cons of the aforementioned steps.
Stay tuned for more information on how best to fund your start-up.