In the US it is quite common for a startup to get its 1st round of funding from SBA (small business association) or an overdraft of $100K from the neighbourhood bank. After that if cash flows can support you should be able to get more credit from the bank. Then there are Mezzanine funds which will give you convertible debt. Infact VC funding is considered very rare in the US.
In India most lending is asset based lending and not cash flow based, meaning you have to have some kind of asset such as a house inorder to raise any debt. Or you have to have parents and family that support you. But how does the average guy get started? There are some inspirational stories about how some did it and it would be great if we can hear them!
So how did you fund your startup?
- Fire employees who aren’t workaholics… - March 9, 2008
- How did you fund your startup? - February 7, 2008
- IAMAI Entertainment 2.0 - October 20, 2007
All the people I know have saved 1 year worth of running cash of their own and started off. And they keep doing small consulting work if need be. But again they are web companies who don’t require a lot of people.
You’re right, for the average guy it is a challenge to do the startup dance. I started the dance during my first year of university in 2002 so it was virtually impossible to get a bank loan for a startup instead I convinced my parents that investing in a video game community called ‘Gamingpal’ was a worthwhile investment. They donated some funds. The project came to a pause 3 months later due to a lack of funding. On the brighter side – I had crucial technical requirement documents. In my last year of university I met Mark Donovan, he was the President of the Golden Key Association, McGill’s only Academic Honor society, and we had a chat about Gamingpal. Mark and I refined the business plan into 25 pages and we raised 70k from family. We then developed a user interface, updated the business plan and raised additional round of angel funding in order to develop our product with a team based in India. Our product t i t a n s t r i k e . c o m (without the spaces) launched a couple weeks ago and we have 1500+ users and counting, we’re looking for another round of funding which is the second chapter of this story. I know that we will find it soon to complete a successful story.
Beg, borrow or steal 🙂 (as Naveen Jain says)
honestly, a combination of:
* life savings
* two hours of consultancy every day
* sell lifelong access to a select list of customers even before developing the product
* build a sales partnership and convince the partner to invest in your business
* credit card debt
* Outsource product development in return for equity
I will explain you the complicated scenario for funding we are doing. we are creating a self-similar pattern software for stock exchange. So it needs lot of research work in software development. which can be done through university phd programs. But in our case we can’nt join university coz we do’nt have money for university education. Then we can adopt scholarship programs. That means we need 6 to 8 months for exam prepration and running government offices for scholarship application. This is also waste of time. In university we know the status of research works and research submission. Secondly theifs and greedy people are sitting in universities.
Solution: Join job collect some money then Quit job when you have money to fund research. Incase if you feel again short of funds then rejoin job for 4 to 6 months earn some money then quit based on requirement. The benefit of doing job is learning the industry methods and techniques. Applying them in our research work. Secondly we gain more knowledge of the subject after quitting and rejoining. In this process do’nt shutdown research work.
We are 4 people so we create sort of money pool. Where people join or quit job based on requirment in research work. I know this is not the best way to do things. But it works for us because we have trust in each other. We are not focusing on finanical part of the research work. we love to do our job that is key to our way of working.
Either you fight for your stomach or you fight for your dreams. Balance can be made through continous changes in plans based on strategic requirements.
Finally it is about friendship between us rather then business proposition between us.
You are right…the ‘average Joe’ does not have friends and family with pockets deep enough to start a start-up. He/She depends on well-meaning angels and VCs to help you but none of such help is actually forthcoming.
We are a print-on-demand solutions provider, arguably India’s only pod provider who will provide you with one single copy of a book if you need it. My wife and I manage our company and, given the non-existent finances that we have, are doing pretty well. We have an active client list of 37 clients, from US, UK, Germany, Tanzania, Canada and Australia (yes, inspite of lulu.com) besides from India, and have set up barriers to entry that depend on relationships with service providers and other allied functions. I get, on an average these days, one enquiry every day and the google analytics software suggests interest from viewers in 34 countries.
You are still reading so I guess I owe you a link to my website. The url is http://www.dogearsetc.com/cinnamonteal
We are also very aggressive, within the means we possess. For that, to scale up, we need roughly Rs. 15mn. Apparently, to get the attention of VCs and even angel investors, we have to ask for at least a million dollars. I have run from pillar to post and the constant refrain is that I am asking for too little (yeah, beggars nowadays get to be choosers).
So I am thinking of selling shares of my company. There is no point in keeping a pie to oneself if that pie is but a morsel. I am looking for investors who will also mentor the company and although I am not sure this is legal, I’d rather deal with that later. As it is, no one will bother to go after small fry like me.
Thank you,
Leonard Fernandes
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Cell: +91-98503 98530
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