- Like it's fascinating to me that all the successful
entrepreneurs I know, they look at being resourceful,
they don't look at somebody else
needs to pay for this thing.
(upbeat music)
How to fund your startup, in this video I'm going to
help you overcome the challenges.
Maybe you have an idea and you're wondering
like where does the money come to get this thing started?
Or you don't feel like you know the right people
in your life to actually help support you
and maybe lend you some money to build the first prototype.
Those are real challenges, but here's what I know,
is I know that some of the best entrepreneurs
that I've ever met never looked at capital
as the primary challenge, they've always looked
at being resourceful, and I wanna,
I wanna unlock that and show you literally
eight different ways to fund your startup,
okay, it's super powerful.
Now I've been fortunate enough that, you know,
I've done pretty much every one of these
I've gone through some incarnation.
I started building companies when I was 17,
failed, did it again when I was 19, failed,
tried again finally after like consulting
and licking my wounds and building my confidence back up.
And at 24 I started a company called Spheric Technologies
with the money I saved.
But then I've also gone in and invested
in a ton of other companies with my own money,
companies like Intercom that's gone on to raise,
you know, 10s of millions of dollars in funding,
Udemy, supporting my brother and his company,
supporting my friends locally,
like what I've learned is there are different ways
to get your dreams, your product, your software funded
and that's what I wanna share with you guys today.
The first one for me is bank or credit cards.
I think that many people start off and they think
well I need to get an investor to get involved
in my business to start, and that couldn't be
further from the truth.
At the end of the day if you are a credible person
and you haven't made horrible life decisions
that have just like cratered your credit score
or relationship with your banker
then you should be able to go to the bank
and borrow some money.
I mean ideally you'd have a credit card,
I mean some of the best companies, Airbnb,
Joe and Brian talked about it, we like
applied for all these different credit cards
at the exact same time and used that funding
to start Airbnb.
I started pretty much with my credit card
'cause I mean if any expenses like servers or whatever,
that was the way I started.
When I started MB Host we needed to buy software
and infrastructure and we had lines of credit,
and I mean that was, you know, personal lines of credit,
loaned to the business, bought all the infrastructure.
So I just think business, banking, bank loans
and credit cards do have this place,
especially credit cards, I just,
I love meeting founders that hustled so hard
to just make it work.
The second thing is to trade equity
and that's both equity in the business,
so the value of the business or a piece of the business
and sweat equity, your time.
So this is nights and weekends and just making it work.
I mean a lot of you guys have jobs
and I think people think they need to quit their job
to start the business and that's just not the case,
what I always say is try to get this new business
to at least 60 to 70% of your current income
and then make the swap.
I mean my favorite story to share is PlentyOfFish,
the guy, you know, PlentyOfFish.com got bought
for 550 million within I think a nine to 10 year period
and he started off by running home every day at 4 P.M.
and coding till 11 P.M., and getting up early at,
you know, 5 A.M., and coding before he went to work
at nine, and going to work and working over lunch.
And that to me is a beautiful thing.
So trade equity, either hire services or professionals
and get equity to get them involved in your business
to help fund things.
The third one is startup accelerators.
In most cities in North America
or whatever part of the world you're watching
this video at you probably have a startup accelerator
that's willing to give you 25, 50K, some give 250K,
to seed and incubate your idea,
and you just need to go through the application process.
And it's crazy, like Y Combinator and Techstars
is harder to get into than Harvard,
but those are legit options for the local accelerators.
Many of them have a lack of entrepreneurs coming to them
with viable ideas, like they don't have enough applicants
that are serious and motivated
and have something worth building.
So your idea presented in a super compelling way
and with a lot of passion and commitment
is probably gonna get you in there
and get some of that funding.
The fourth area is VCs and professional investors.
So VC stands for venture capitalist,
these are people that manage funds,
so they actually go out and raise their own money
which is kind of neat when you understand that,
so you're raising money from them,
they actually had to do the exact same exercise
and raise from what's called Limited Partners,
and now the VCs have to make decisions
on who they give money to because they need to
generate a return over a 10 year period.
I say that is because there are thousands
of venture capitalists in the world
and they're looking for the entrepreneurs,
and just so you know, they don't have a job
unless people like you go out there and create the future.
And I think that's an exciting place to come from
and a kind of a reframe from what many entrepreneurs
starting off get into which is I need their money
to be successful, at the end of the day
they need you to actually be successful in their fund.
So VCs is a great source.
Another one would be local angels
and kind of high net worth people.
So in your community you have angel groups,
these are people that own real estate,
they own the car dealerships, they may own
really profitable high revenue businesses,
and they wanna diversify a bit
and get involved with like young and eager
and fun companies, so they're part of these angel groups
and you can actually maybe on a quarterly basis
they have a meeting where you can come in
and pitch and raise money that way.
So that is a super valuable and typically open up
to everybody, you know, even in towns of 100,000 people
they have an angel group in your state or province.
Six would be crowd funding.
You know, one of my buddies Clay Hebert,
one of the foremost top experts on crowdfunding,
he said it best, is he said that the cost of failure
is gonna go to zero because crowdfunding
has leveled the playing field for market validation
before you build anything.
So not only is crowdfunding an incredible source
of capital to or money to start the company,
it's also a beautiful way of testing if there's a need,
if there's people out there that actually wanna buy
what you're gonna build or sell,
and you can do that on Indiegogo or, you know, Kickstarter
really doesn't like software projects, GoFundMe,
there's a ton of different crowdfunding platforms,
but at the end of the day, just so you know,
it's 20% video and the page itself and the story you write
about your project, your software project,
and really 80% about marketing and distribution.
They're not gonna get you the project funded,
you're gonna have to do some work, email some bloggers,
email the press, really drum up a lot of interest
in that crowdfunding campaign.
So super powerful, but there's work involved,
so don't, you know, be misled and think
this is gonna easy-peasy, 'cause it's not.
The seventh is friendly and family,
sometimes they call it fools, and I just find that
super insulting, so friends and family.
These are people that know you best,
that believe in your vision, and are willing to back you.
I remember when I started my company Flowtown
with co-founder Ethan, it was early days
and I had sold my previous company Spheric,
so financially I was in a good spot
and I could've funded the whole company,
but one thing that I felt, and really this was just
as a way for us to set the
foundation as strong as possible,
I said to 'em look, I'll fund, you know, 70% of this,
but I need you to go and raise the balance,
30%, from your friends and your family members and whoever,
literally just like go find someone who's gonna lend you
the money and meet me halfway.
And this was a huge reason, and like I always knew
Ethan was incredible, but I remember this was like
a conversation on a Friday and on Monday he called me
and he says I got the money.
And I was like all right dude, did you do anything illegal?
And he's like no.
I'm like, where did you find that money?
'Cause we're talking 10s of thousands of dollars.
And he said my mom gave me some money,
my dad gave me some money, and a couple best friends
from college gave me some money.
And for me as a partner that just said so much
about Ethan even though we had just kind of got
to know each other over the previous year,
here are people that have known him his whole life
and were willing to part way with arguably
one of the most, you know, valuable assets
in somebody's life, they were willing to invest in him,
and really before there was any product
or proof that this was gonna work,
and I just thought that said so much.
So friends and family I think is an incredible,
just be honest with them, just tell 'em, it's high risk,
and I'm gonna make the best decision I can
with the information I have, but don't give me money
you wouldn't be comfortable losing 100%.
I just think that's where things get a little dicey
when people misalign expectations.
And number eight, the most important,
and I'm gonna share a really quick tip for you
right after this, eight is to fund yourself.
I think so many people have jobs and they go,
well I'm gonna quit my job and pursue this idea
once I raise money.
And when I hear that, just so you know,
what I'm thinking is you don't even trust yourself
or willing to bet on yourself and you expect me
to fund that risk, and that to me is just crazy.
If you're not willing to put all in, you know,
slide all the chips, that's what this motion is,
go all in on your idea, but yet you expect everybody else to
I think that's just a negative signal
and just a really weird place to start
a relationship with investors.
So funding yourself, digging into your own savings.
I mean Maritime Vacation was friends and family,
my dad essentially helped fund that business
and I to this day continue telling that story
'cause it was super incredible for him to believe in me
at 17 years old.
MB Host was my line of credit with my brother
and his line of credit to fund all the servers.
Spheric Technologies was working and funding in myself
and saving up 70,000 dollars to eventually
start that company.
Flowtown was again, me putting my own money in,
Ethan putting some of his in,
and eventually we raised venture capital
from professional investors, you know, guys like,
you know, Steve Anderson from Baseline Ventures,
first investors in Instagram and Twitter,
and just like, and then Clarity again,
Mark Cuban invested in that, but I put in,
you know, almost half a million dollars of my own money
to get that company started, and then we eventually
raised 1.6 million, but it's kind of like
all eight of these put together.
Now I never did an accelerator, I have a great video
on how to start your own accelerator
if you wanna search that out, I think it's,
it's a great way if you don't get in
it doesn't mean you should stop doing the things
you would've got as value from those accelerators.
But those eight tips, right, you know,
the going to the bank, using lines of credit,
you know, trading equity to help bring in resources
in or sweat equity to build the business,
to use startup accelerators as a way to fund,
validate, and help you grow the business,
to reach out to VCs and professional investors
is you know, super smart.
Going to the local angel groups or finding those
high net worth individuals, they're there,
they're in your city, they've got millions of dollars,
100s of millions in some cases,
and to throw a check your way for 50K is not crazy.
Crowdfunding, cost of zero, cost of failure goes to zero.
Friends and family is a beautiful thing
'cause it says so much about trust.
And then finally, invest in yourself, that is my mission.
Now the tip is is the mindset,
here's the way I think about it.
Don't raise more money than you're willing to lose
and if you lose it, you chalk it up as learning, okay?
So that's the way I think about it is
you're investing in yourself, in your business,
not so much for the financial outcome,
but your opportunity to learn.
So in some ways it becomes education
and that's the way I think about it,
so I don't get too hard on myself if like I put
20K into a small little project and it fails,
I just chalk it up as learning.
Now the best ultimate financing ever,
the world's best, kind of like crowdfunding,
I just call it customer financing.
Finding customers to pre-buy the product
that you wanna build as an early adopter,
it's a whole framework I've created
called the customer creation model,
but it is the best form of financing.
As per usual I hope this video finds you incredibly well.
I wanna challenge you to live up your life,
and a bigger business, and I'll see you next Monday.
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