How To Fund Your Own Startup Like a Venture Capital Investor
How much money should you spend getting your startup to the next level?
Is it Mistral AI money and the unlimited potential of their $113 million initial raise? Or is it the scrappy stories like Spanx, RxBar, Tuft & Needle, and countless others who got started for at or under $10,000?
It turns out that it’s actually the wrong question to ask. And, as usually happens when the wrong question is asked, the wrong answer is given, one that loosely translates to “you need to spend as much money as it takes.”
This causes two very bad things to happen. For one, it excludes a lot of smart, talented people from entrepreneurship based on incorrect financial requirements. But worse, it’s advice that leads entrepreneurs, even experienced entrepreneurs, down a dark path of feeding a beast because they feel like it’s a requirement in order to succeed.
Because of those reasons, I try to give a different answer. With every startup I’ve self-founded and self-funded, I’ve spent about $10,000 out-of-pocket during the first 12 months to get from idea-on-paper to a better-than-even chance for success. They may seem like a lot of money to you, or it may feel like it’s nowhere near enough to hit great heights.
Regardless, the trick isn’t how much you spend, it’s how you spend it.
You Are Your Own Venture Capital
First, let’s ask the right question: Why are you spending money on your startup in the first place?
No investor puts their money on a roulette table and hopes for the right number to come up. Neither should you. You’re not spending money so that your startup can become successful, you’re spending money so that your startup survives as you execute the strategy you believe will make it successful.
All strategy starts with milestones. These are mandatory. If you take one insight away from this article, make it the point that whether you’re spending $113 million or $10,000, you’re never spending it blindly and all at once. And you should never throw good money after bad.