Starting a business with nothing
A viewer recently asked me how he could launch a startup when he does not have any significant savings or wealthy connections. With just an idea, but no source of capital, he is going to have to do this the hard way, because no outside investor will ever fund a first-time entrepreneur with only an idea. If an entrepreneur has a significant track record of successful exits, then they might be able to get investment in their idea, but at that point, they would also have friends and family with money.
If you are in this position, your first step is research and lots of it. You need to know everything about your business and market. Fortunately, it takes little or no money to conduct this kind of research and experimentation. For a company starting with no capital, avoiding waste and mistakes is even more critical. I wrote an entire episode on testing assumptions.
Can you build it yourself?
Engineers found most tech startups because they can build the initial prototypes themselves. They use their time, rather than cash to launch the company, avoiding the whole problem of fundraising on an idea.
If you are launching a software-based business, can you code it yourself? You don't need to be the best programmer, just good enough to create a proof of concept or prototype that can demonstrate and validate the company's premise. I wrote much of the early code for Anonymizer and a few other products. I am not a professional developer, and that software was spaghetti code of the worst kind. But it got us initial customers and demonstrated that the idea was valuable or, in some cases, not. The same concept applies equally to hardware and service-based businesses if you have the needed skills.
With just enough functionality to demonstrate your capability, and to validate customer demand and engagement with the solution, you are ready to bring your company to outside investors.
If you can't build it yourself
But what if you are an expert in business, sales, or marketing but have none of the skills required to create the solution? After you have finished all of the research and testing you can do without a product in hand, you must start evangelizing your startup to more technical entrepreneurs.
Many technically skilled individuals want to be entrepreneurs but don't have an idea for their own business. Get them excited about your idea and bring them onboard. It may take a long time to find the person who both has the skills you need, and fully appreciates and shares your vision.
This person will be your co-founder. They can spend their time creating the prototype and MVP while you focus on networking, pre-marketing, creating visibility, and yet more research. Mutually respectful technical and non-technical founding teams are incredibly powerful and attractive to investors. Your new technical co-founder will expect, and deserves, a substantial stake in the company. You literally could not do this without them, and they are not getting paid any salary.
Spend time, not money
People often say that we should always spend money to save time. In this no-money situation, the opposite advice applies. In an unfunded startup, you are using time, which you have, to avoid spending money, which you don't. Beyond creating your prototype / MVP and doing research & testing, many of the other activities you should pursue depend on whether you are creating a consumer-focused offering or a B2B company.
Consumer
- Leverage free tools and online communities to get beta testers and early users. ProductHunt.com is a good example.
- Engage in social media to build a following and create excitement about what is coming.
- Participate in relevant online communities that will provide visibility, future users, advisors, partners, and investors.
- Leverage PR if your solution is newsworthy. A company I help gets amazing PR because he is a veteran who makes a device addressing PTSD.
- Use inexpensive online ads to test your messaging and the market need. You can learn a lot from just $100.
B2B
- Network with everyone in the space, in person, on LinkedIn, in forums, etc.
- Ask for referrals and introductions to potential partners and customers.
- Join associations and groups (that are cheap or free)
- Attend industry events (that are cheap or free)
- Spend time meeting and talking with potential customers, not to sell them but to learn from them.
For everyone
- Attend and present at pitch contests to hone your message, meet other entrepreneurs, and connect to advisors & investors.
- Join quality accelerators or incubators for networking, logistical support, discounts, and sometimes funding.
- Find potential advisors and sell them on the exciting prospects for your business. They can help with strategy, tactics, and growth. They should also make introductions and generally provide an experienced outside perspective.
A long hard road
Because you won't have any cash to spend, building your company to the point where angel investors are interested may take a long time. The process is challenging but not impossible. By the time you are ready for fundraising, you may be so good at bootstrapping that you find you don't need to bring in investors after all.
Graduates of the Founder Institute are creating some of the world's fastest growing startups, having raised over $1.85BN in funding, and building products people love across over 200 cities worldwide.
See the most recent news from our Grads at FI.co/news, or learn more about their stories at FI.co/journey.
