In the midst of $25 million raises in TechCrunch headlines, startup founders often believe raising venture capital is the sole road to success. But is it? The honest truth is it is the sole road for a very few startups — deep tech, capital intensive, etc. The majority have options and don’t necessarily need to raise institutional funds. Let’s unpack this a bit, shall we?
First, let me intro myself briefly: I am a startup veteran, early-stage advisor and founder at Kamp. We host startup events around the country and have helped over 4,500 founders to date. We provide amazing experiences — think education meets opportunity meets party — for startup founders and will be in the Philly area on Saturday, Aug. 21, for an IRL event.
OK, back to your options for growing your business, aka why you are here.
The friends (fools) and family round are a great starting point to test one’s theories. Typically, it’s on a convertible note or SAFE to make things easier, give your aunt or uncle an incentive for getting in early, and most importantly delay the process of ambiguously valuating your startup before any real metrics.
Cool, but what if your family isn’t wealthy?
Crowdfunding has been gaining more and more popularity as of lately and it’s truly a great option especially for product-driven startups. Basically, strangers can buy a portion of your company or you can dangle custom rewards for their cold hard cash and keep them off the cap table. There are many ways to skin the cat for crowdfunding, but just keep in mind the nuances of each platform — some you don’t go live until you hit a specific dollar amount, others, you have to heavily promote your campaign, etc. Most significantly (and recently), the SEC increased the maximum amount that can be raised through a regulation crowdfunding campaign from $1.07 million in any 12-month period to $5 million — a nearly fivefold increase. Wowza.
But what if your startup doesn’t fit their criteria?
I think we can all agree that COVID sucked for most people and startups. But here is something cool that came out of it (glass is half full with me): virtual meetings and events. Now, you don’t have to drive 12 hours to a pitch competition. Some are literally held online and give away thousands of dollars in cash. Go on Eventbrite and sign up for every relevant pitch competition and sharpen your skills in front of the computer camera. Stack this strategy along with some in-person pitch events to build a solid base.
— Kamp ?? (@kampevents) July 28, 2021
Suck at pitching but still have money coming in? Not to worry.
Let’s talk about companies like Clearco or Pipe. These type of organizations are in the game of lending upfront for early stage startups “with revenue traction.” These companies will front up to $10 million cash without taking equity and sometimes without debt. Clearco typically focuses on ecommerce and Pipe focuses on B2B — but both companies require an evaluation of recent revenues, MRR, MoM, etc. There are others in the game, but I feel these two are the most relevant right now.
Lastly, there is this wild thing called revenue that a startup gets once they prove a product or service valuable.
The term bootstrapping applies when you take your revenue (profits) and use that for growth. This is 100% the best route IMO, but also the hardest. Here’s why: You will not be paying yourself now, but betting on your future company to pay yourself even more later. This hurts. Frugality is always at the forefront and your family may think your business is just a hobby. But, if you truly believe in what you’re doing (and have a few thousand stashed away in savings) this method is undeniably the best option since it allows you to retain ownership, and more importantly, control of your destiny. The moment you take on investors is the moment you answer to other people.
Every VC looks for high-growth startups but not every startup should look for VCs.
If you want to learn more about these kind of subjects, make your way to our Day Kamp event on Saturday, Aug. 21 at 1776 Cherry Hill Mall. We have a full day of education, amazing presenters, networking, investor panels, pitching and a kick-ass happy hour. You can also email me at Phil@StartupBootkamp.com if you have questions, or want to talk about late 90’s rap music.
You can use the code “tech2” for 15% off all tickets with link below:
Read More:VC raises make headlines, but don’t forget there are other ways to raise capital for your