Bootstrapping and Alternative Sources of Funding - Entrepreneurship 101 (2013/2014)

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“Bootstrapping” is the act of building your business using your own funds and revenue from customers, instead of raising money from outsiders such as angel investors and venture capitalists. Most …

“Bootstrapping” is the act of building your business using your own funds and revenue from customers, instead of raising money from outsiders such as angel investors and venture capitalists. Most start-up companies use bootstrapping, or alternative sources of funding such as crowdfunding, to build their ventures.

This discussion explains how you can pull your company up by its bootstraps.

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  • 1. So  you’ve  got  a  great  (validated!)   idea,  tested  your  business  model,   and  you’re  ready  to  launch  your   new  startup…  
  • 2. Now  you  need  money  (and  lots  of  it)!  
  • 3. Bootstrappers’  Hall  of  Fame  
  • 4.    
  • 5. •  Starting a business with little capital or formal investment" " •  Using your own finances (savings, credit card, loans) or ‘friends, family and fools’" " •  Selling your time/expertise on the side (consulting)" " •  Selling an early product to fund company development" " •  Leveraging other sources of funding (government grants, crowdfunding)" " "
  • 6. •  Bootstrapping is the only option for companies that won’t grow quickly or provide a significant ROI to investors" " •  Even companies who will get investment later may need to reach certain milestones/levels of traction on their own first" " •  Some entrepreneurs choose to bootstrap to maintain control/full ownership over their company" •  Forces you to focus on priorities and leverage what you have (time, expertise, money)" " "
  • 7. Start-up capital is NOT the leading predictor of success: " " •  Companies started with <$1000 as likely to be profitable as those starting with >$100K" " •  Companies launched with <$10K achieved almost as rapid a median growth rate as those that were loaded with start-up capital before company’s first sale" But size affected: " " •  Companies with >$100K seed capital employed on average 150 people and had $21M in revenue; <$1000 seed capital had 56 employees and $13M sales"
  • 8. •  Keep overhead low! •  Share office space or work from home" •  Use QuickBooks, Wordpress. etc. and other affordable technology solutions" •  Low fixed costs; keep costs variable" " •  Leverage relationships! •  Tap network for discounted services/deferred fees" •  Use advisors and mentors" •  Find employees who will share the risk (and upside)" •  Leverage suppliers to only get paid when you make money" •  Paid product development: customer that needs your solution badly" " •  Do-it-yourself marketing and hiring! •  Use interns and contractors to keep costs flexible" •  Pay commission-only for sales people" " •  Money management! •  Line up credit before you quit your job" •  Look for service opportunities related to your business" •  Focus on sales not just product development" " •  Pick the right business (short selling cycles, recurring revenue)" "
  • 9. A search tool on the MaRSDD website to help entrepreneurs connect to more than $30 billion in 4,500 government funding programs •  $26B in grants and $4B in tax credits. " •  Average grant size among the top 500 recipients is about $1.8M. " •  About 1.5% of grants are over $10M" •  76% of grants are paid to companies and about 95% of these are paid to SMEs" •  28% of recipients are based in Ontario " •  Top sectors are manufacturing, media, and tech" " " " marsdd.com/funding ! !
  • 10. •  Kickstarter: Passed $1 billion in pledges from 5.7m people in 224 countries; Canada: 1400 projects had $44m in pledges raising $14m" " PROS   CONS   Validate  an  idea   Lots  of  failed  campaigns   Pre-­‐sales/Sell  first  product     Launch  too  early   Build  market  awareness   UnderesFmaFng  cost  of   fulfillment   No  equity     Wrong  price  point   Works  well  for  NFT/arts  ventures   Wrong  product  
  • 11. Pg 13" The Crowdfunding Success Pattern! " Learn how your startup can leverage and maximize crowdfunding from Brian Meece of RocketHub. " Crowdfunding Change: Tips and tricks for social innovators from Indiegogo! " Amy Lesnick, Head of Social Innovation and Non- Profits, Indiegogo, discusses how crowdfunding has become a transformational tool for social innovators." "