business-model, financing, bootstrappingLots of startups dream of having a great idea, crafting software for it, going viral and “some how” becoming a billion-dollar business. That’s great, but I often feel that there’s a lot to learn from just running a functional startup.
I realize that this a pretty broad topic, but I’m not looking for a very specific answer, just a general approach on how to start a startup with no money without taking on debt.
I personally believe in bootstrapping and the “lean startup” idea. In other words, start small, and then grow gradually.
Me, I don’t care about conquering the world. I just want to solve a problem for as many people as I can without going insane. I have ran a few ventures as “small businesses” without having to break the bank.
#1: Freelance Website Developer All I needed was a laptop, and internet. I already had a laptop so the only investment was for internet and time to learn and practice.
#2: VoIP Voucher Reseller The profit was little, but I was making about $100 per week on the side. Total initial investment was about $200, and the business was self-sustaining.
#3: Frozen Chicken Total investment was about $300 for a second hand deep freezer and the first round of chickens. The business was self-sustaining and I was selling about 20 chickens per week out of my dorm room.
These was all small businesses that I ran well, and made good money as a student.
#4: Study Abroad Agency Investment was basically for web hosting and internet. The company is in Nigeria but I have been running this from my laptop since 2011… from Cyprus! By 2012 it became serious that I had to incorporate the company in Nigeria as it expanded beyond my expectation.
Right now, I’m quitting my job in Cyprus to return to Nigeria and setup the office and run it full time. The business is worth $700 profit monthly and I would only have to invest about $2,000 to stay lean. However, I’m trying to see if I can raise about $10,000 to setup the office because I want a green office… I want solar panels, as its cheaper on the long run, better for the environment and electricity is shit in that part of town. If I’m not able to raise the money, I would remain lean. (Remember, I’ve been running the company from my laptop since 2011)
So… these “small” businesses are can be scaled to serve even more people and I did not have to take any loans whatsoever.
My advise… start small, then grow gradually.
I started freelance web design first by working on personal projects. I made sure people know what I could do, and soon I was getting paid to do same for others. From 1 website, to 5, and so on.
VoIP vouchers… I started with 5 vouchers (I still remember). The profit was shit! but I was determined to be the main supplier on campus, and I was! I stuck in there with the little profits until I was placing orders 3 times a week.
The frozen chicken required more investment, but again I started small… with 20 chickens. Also, I started with a partner and so all costs were halved. Slow and steady, we went from ordering about 20 chickens a month to 40 or 50 a month. It was good business.
As for Study Abroad, I started out by give advise online on forums for free. My university found out and invited me to apply for agency. I applied and they gave me. I was getting paid to do what I was already doing for free! Again, slow and steady I went from representing 1 university in 2011, to representing 13 universities in 8 countries by 2013, as well as #3 agent in Africa and #2 agent in Nigeria for my university.
So yes, you don’t need loans. Start small, start lean.
Pre-sales, sell your product before you build it. For example say you want to build an application to help businesses with their payroll, if you can find potential clients and convince them to purchase the product prior to it being built, you can then use these proceeds to build the product. Client will sometime agree to this if they can give input into how the product is created. You can think of this as developing a custom application for their business, where you keep the rights to the source code which you latter generalise to sell to the broader market.
though I’ve used a tech example this notion of pre-selling is not limited to tech. Much (but not all) of what happens on crowdfunding websites such as kickstarter and indiegogo can be view as pre-sales.
You could also try to gain some funding but with only an idea you will have a really hard time finding someone who wants to invest.
You could also look at government grants, or trying to win a business competition, but these generally don’t afford you much in the way of startup capital.
If your business plan does not require a large capital investment to start off (for equipment, office, employees, etc.) then you can scale up as you grow. You can start from home or a garage, keep costs low, use whatever cash you have for advertising to get new customers and for raw materials to make your products. Have a cash-only basis or be very diligent about collecting your payments. If you have trouble raising money for products then request an advance payment until you have sufficient cash built up.
If your business plan requires large investments then you have the choice of trading equity in your company for capital investments. You can sell shares in your company to your friends and family or other angel investors, find colleagues, dentists, rich uncles or other affluent people you may know who maybe interested in investing. Finally, you have venture capital firms who may be specializing in your industry.
Personally I prefer the scale-as-you-go idea. You have fewer people breathing down your neck and if you fail, you can still boot back up without having lost other peoples’ money. As you scale up, you become more attractive to VC firms, because now you have a finished product, customers base and a proven revenue model. If you take a VC at this stage, you may not require as much capital and therefore would not have to give a big chunk of your company to the VC.
Self-bootstrap using F&F money and optimize for revenue as early as possible. A good case is Github ($750 million?):
GitHub.com is a start-up business, which in its first years provided enough revenue to be funded solely by its three founders and start taking on employees.
The most successful self-bootstraped startups seems to be of the "scratch-your-own-itch" kind. In fact, this is one of the best reasons to start a startup: if developing your own business is the only way to solve some annoying problem of yours.
Start by doing what you love to do, what you would do for free if you could, what you can do all day and night without tiring. In my case its website development and Internet marketing. I did have a college degree in Marketing but everything Internet and website related I learned on my own in my spare time from Google. I financed myself by doing what I had to do to pay the bills but all other time was spent learning everything I could regarding Internet marketing and web design. If your passionate about what you are doing and do it well people will begin to notice. Give people a taste of your product and if its high quality and fulfills a need then, people will gladly pay you for it. For example, I built stunning coming soon website pages for potential clients before asking for a dime. 9 times out of 10 a 2-3 hour investment of time turned into a $1000-$4000 website job because I showed them exactly what I could do for them. Bartering is another great way to perfect your craft (product) while getting the resources you need. I’ve exchanged websites for software, hardware, food (free pizza for life for a company I did a website for)vacations, etc.
I wouldn’t start out looking for the next “big idea” or focusing on a creating a product that will go “viral.” That will put too much pressure on you and zap your creativity. If your really good at what you do, and you love what you do with a passion then you will easily be able to see what needs aren’t being met and what niches you can dominate if you choose. As far as going “viral” that starts with an excellent product, lots of hard work, and an amazing marketing and promotional guru. (plus a bit of good luck)
My recommendation is to join the Startup community in your city.
Another idea is to find co-working places where you can find people willing to collaborate with other projects like yours.
Finally, an alternative solution I discovered the last week is to use “barter websites”. You can find very good professionals in some websites. If you research more about that please let me know!
UPDATE
I actually recommend the book Running Lean by Ash Maurya. It is a step by step guide to create a Startup with no money.
With no money at all, I believe that's impossible until you have a really good marketing network. If not then you will need some money either for marketing or for development. You can't be good at both marketing and technology (At least I wasn't)
Hard work can reduce the cost estimates, BUT increases time required to make it a sustainable business.
Its a broad topic and you must have a plan in your mind before you start. Some time back I wrote this (How to Start a Startup?) article to help start ups.
Hope this helps.
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