This is a tough question to broach with entrepreneurs but it’s one that comes up almost daily. From where does the money come to start?? There is a reason most entrepreneurial success is found by people in their 40s… being able to leverage a network, drawing from experience, and having the money available to start something, makes a world of difference.
Many founders start by asking how they raise the money and the reason this is always a tough question to broach is that the answer is you don’t raise money, yet. You have to start under your own horsepower. How? From where does that initial capital come?
There’s really only two sources:
- Friends and family
It’s been interesting being part of the startup community for nearly 25 years; seeing how the shift of technology innovation from Silicon Valley (primarily) to other parts of the country/world, has actually been met with a rocky reception.
One of the ironic benefits of the fact that N. California is insanely expensive, is that no one presumes you can just start and people will give you money. Incubators and universities aren’t selling the idea that everyone should just be a startup founder, “it’s easy!”
No one, there, presumes bootstrapping is a good idea (some may believe that but no one just presumes it’s always the better way)… considering the time and energy it takes just to close enough customers that you might actually be able to run a startup without otherwise having income…. bootstrapping is rather considered a last resort, not the ideal.
The explosion of University Entrepreneur programs and incubators beyond California, in the last 10 years +/-, can be directly tied to a perception that people just start startups.
Everyone can do it! We just need to be taught how.
Thing is, in N. California, because of the costs of being there, essentially EVERYONE started their venture WHILE working for someone else… or later in life when they can afford to… or because they have others who float them the money.
None of this means that “Silicon Valley’s way” is better. I’m not praising that and knocking other approaches; I’m merely noting the irony of the fact that the COST of being there all but REQUIRED startups start how they should start everywhere. Yet, because elsewhere isn’t expensive, or companies don’t like the idea of employing you while you start something, or they’re encouraging 20 year old graduates to start companies… people think the money is just there, or that if you get to customers enough you’re good.
End of the day, the only answer is the same as it always has been:
- Work while you start your ventures OR
- Get the money from friends and family