This weekend I broke ground on book #7 in the series, The Next Step: The Realities of Startup Funding.
The key lesson is that for startups, money is time. Or more specifically, money buys your a faster time to market and a potentially faster path to profits.
This is not how venture capitalists or Angel investors talk about money. For them, money is fuel. Which, from their perspective, is true too. Investors invest in order to turn $1 into $10… as quickly as possible. The tool they use to make that happen is money. Their masses of dollars are aimed at entrepreneurs who can most quickly turn investment dollars into revenue, and revenue into exits.
Back at the majority of startups, which never raise money from those “professional” sources, money and time are tradeoffs, however, typically with a big limitation on the quantity of money. With money, you can hire an employee or contractor to build your product or your website or whatever you need built. You can purchase a list of sales leads or hire a salesperson to make calls all day to qualify leads. Or, without money, you can do all of this yourself, which will take more time.
As I work with and teach entrepreneurs, I find very few who understand this tradeoff.
It seems as if all the news coverage of the high-flying, highly-funded startups has taught most entrepreneurs the venture capitalists’ story of money. Have idea. Raise money. Make millions. That second step, “raise money” is talked about as a given, almost a right of all entrepreneurs. Meanwhile, the reality is that less than 3% of all startups in the U.S. raise money from Angel investors, and far less than 1% from venture capitalists.
Given those stats, what most entrepreneurs should be thinking about is a different story. Repeatedly questioning, how can I turn my idea into reality without a minimum of funding. Self funding to start. A bit of crowdfunding. Customer revenues as growth capital. All with a minimum of trading dollars for time.
Time is money is chapter 1 of the new book. The remainder will cover bootstrapping, crowdfunding, the business model of investors, and the odd story of how startup valuations come about.
If you are an entrepreneur looking for help with your startup, there are six other book in The Next Step series already published, covering the startup process, financial planning, marketing and sales, pitching, splitting founders equity, and an extension to the Business Model Canvas. All can be found in paper and Kindle on Amazon.com, or as an online subscription and online class at lunarmobiscuit.com/the-next-step.