5. Capital and Fundraising
Businesses can only build to a level with little or no capital investment. The old saying goes, “It takes money to make money.” In some cases, scaling up for startups with similar ideas is usually capital and proper investor funding. In some cases, it is from early customers and sales revenues. In most cases, it is from investor funding across different stages of a startup’s development.
Founders and CEO of businesses live and understand a simple mantra, “Cash is King.” This simple mantra should be what your startup should live by to survive tough times.
“You cannot run your business on the promise of receiving future payment. Cash is one of the primary measures of your startup’s success at every stage”.
~ Aaron Webber, CEO of MadisonWall
Your very first option at raising capital is self-explanatory and straightforward. Organically raising funds from your customer requires something valuable to offer the market. Your customers must be willing to bootstrap your new venture with their patronage. If your startup is within a definable trade or professional service, this fundraising option fits you perfectly.
Furthermore, for startups that seek to develop and introduce a new kind of product and technical services to their market, this may require a dynamic type of funding. The software development industry expects to raise funding via pre-seed and series funding, where proof of concept and prototyping may take several months.
In such scenarios, startups need to cover the operational and development cost with financial investment. The investors come in to cover the operating expense during the development phase. For some startups, pre-revenue stage funding comes from the founder’s resources and immediate circle. In some cases, these funds are enough to take them to a level with prototyping.
Nick Woodman, the founder of GoPro, Inc., is the perfect example of a company that bootstrapped from his pocket. He was able to get his startup off the ground by working different jobs and scrapping every penny to develop his product. GoPro is an American company that develops high-definition personal cameras. It is popular among sports enthusiasts because of its hands-free and high-definition video recording capabilities.
Elon Musk’s Tesla is another example of a company dependent on funding. Tesla was a beneficiary of the government program that gave out funds to companies with green technologies. Without this particular funding, Tesla would most likely be part of companies that could not scale.