At seventeen-years-old, when most people were making out in the back seat of their parent’s van or lettering in varsity football, I was behind a computer scheming to fulfill a need that the American businessman didn’t even know they needed. I learned how to hard code and assemble a computer at age 7, and was subsequently put my passion to practice through multiple business ventures like SubmitAWebsite and most recently a globally recognized digital marketing firm called iAcquire.
I’ve learned that the journey of entrepreneurship is littered with challenge, all of which essentially shapes who you are and how successful your business will be. And, no matter how you slice it, you’ll learn famous mistakes the hard way – even though many of those mistakes can be avoided by watching others and reading books.
You’re going to need to make those mistakes on your own though – and that’s the fun part. For those of you who are budding startup founders or Internet visionaries, here are five things I learned along the way on your behalf:
1. Validate the market before you start building your business.
Every entrepreneur believes their business venture will succeed, but there are good reasons to seek quantitative market validation. Confirm the size of your target market and your competition, then subsequently create a financial model and build upon it.
Estimate your overhead cost and compare that to how much you think your business can bring in over the same time period. Not only does validating the market increase your chances of startup success, but potential investors prefer a validated business with financial projections. You’ll never hit your exact projections – most likely you’ll hit way under or way over.
2. Financing helps, but its not totally necessary.
The two most successful businesses I ever started raised no money. While, I saw many other funded startups go under. That said, sometimes you need seed capital, and you have many options to raise it. Here are several ways you can raise cash for early and mid-stage startups:
- Kickstarter: An online funding platform for innovative ideas
- Prosper: A peer-to-peer lending marketplace
- Kiva: A micro-lending platform designed for international crowd-sourced loans
- Equity-based loans: You’re house, car, etc. Any bank will do it if the deal is right
- Credit cards: Yep, these things have launched many a business venture
- Venture capital: Be prepared to give up big equity but get a lot of money
- Local angel: This is a real pain, but sometimes it’s your only option
- Local or Regional incubator: Making the right pick is critical, and good incubators are uncommon
- Line of Credit (LOC): You need a good amount of quality A/R
- Factoring: You need quality future receivables and contracts
- Term Loan/Airball: You need strong top and bottom line
- Forward-Looking Revolver: It’s like an LOC, but it goes forward not backward, and it’s based on revenue not receivables
- PE Growth Equity: You need strong revenues. Like a VC, but cheaper money
- Mezzanine lenders: For equity and interest deals. (They can be sharks sometimes)
- Asset-based lenders:They give you $.20 on the dollar valuations for hard assets. High interest, and can be risky
3. Master your pitch and audience.
What persuades an investor to write a check for a raw business idea? What coerces your first customer to sign on? The first few years of your startup is a formative time for networking, gaining investors, and bringing on new customers … and your success lies in crafting and delivering the perfect pitch.