April 14, 2012

Startup Success Step #4

How much capital do you need for your startup?

Tough question, with as many answers as there are startups. Don’t accept the formula that you must have a 12-month supply of money to operate the business – why prevent yourself from creating your venture just because your funds are limited?

Yes, the undercapitalized startup is in perpetual peril. Fueled by impatience and wishful thinking, the rocket gets off the launchpad but sputters out of fuel before reaching orbit. Splash happens. So it’s important to make an objective, realistic, careful estimate of how much capital you believe you need to launch. Then double it.

However daunting that may seem, it is still possible to succeed without having a boatload of your own bucks … especially if your market is identified, your differentiation is relevant, and your story is compelling enough to convince investors.

The important part of that last paragraph is “enough to convince investors.” Hey. If you can’t persuade the money people, who are presumably more objective and practical, less likely to be starry-eyed, should you really rethink the whole project? You are and will be your most important investor, after all, and have the most at stake. If nobody (well, except Mom) sees it as a great place to risk money, is it too risky? Is everyone else out of step?

The good news is, they might be. Many an entrepreneur has been dismissed as delusional, only to be redeemed as a visionary. So follow your dream – take the first step to persuade the market to buy your widget by persuading investors to help make it happen. As the old Bedouin saying goes, “Trust Allah, but tether your camel.”

Jump to the next in this 16-part series, or start at the beginning.