HOW TO FUND UR START-UP WITHOUT A VC!

Alas 90% of the start-ups die during their first year and only 1% make it through their third year, one of the key reasons for closing down the shop is the lack of capital. Whatever is being advertised in the media these days but the ground reality is that there is nil or absolutely no external funding system in India, there is no mechanism except VC funding which can help entrepreneurs fund their start-ups. Majority is not really lucky enough to get funding based on the pre-money MVP,   This blog is for you if you were not lucky like the Bansal’s or the Bahls, whose timing was so sacrosanct and perfect that they landed right at the beginning of the funding cycle, did that one right thing brilliantly and got funded within the first 2 years of start-up. Following are some of the tricks which we ourselves had tried out and made it through the first year without diluting any equity, hopefully it will be helpful to many more mortals like us and help them sail through their dream journey  

Convertible Preferred Shares (CPS or CCPS option): well if you are trying to bootstrap your start-up by friends and families, what do you give them in return? This is the point where (CPS or CCPS) option comes very handy. Convertible Preferred Shares are corporate fixed-income securities that the investor can choose to turn into a certain number of shares of the company's common stock after a predetermined time span or on a specific date. The fixed-income component offers a steady income stream and some protection of the investors' capital. However, the option to convert these securities into stock gives the investor the opportunity to gain from a rise in the share price. Convertibles are particularly attractive to those investors who want to participate in the rise of hot growth companies while being insulated from a drop in price should the stocks not live up to expectations.

Alternate revenue stream: What if you don’t have anyone in your friends and families network or what if the entire majority of your known beings suddenly start distrusting you and think you are on a suicidal path after leaving that fatty corporate job. The only option you have is to start generating revenue from day one, ignore all those who suggest you that if you start doing services your start-up will turn into a scary monster which will be untouchable by any VC. Start doing consulting and service with a small section of your founding team, the only note of caution is treat this unit as a completely separate business unit in your larger organization and stay focused on your core strengths and competencies. Consulting and services have a very positive side if you get your first few customers, they can also act as the mentors and beta testers for your actual product, especially in case you are B2B focused.  Actually an honest start-up which is bootstrapping in this manner is several times better than the other half which is just blowing VC money and acquiring fictitious customers through irrational discounting.

Sell your ip’s as solutions: One of the other techniques which can land you your first B2B customers and if you already have a few then help you grow your account is using the core IP of your product and pre-sell it as a solution. For example your analytics platform might have a fully matured next product to buy algorithm, you can sell this solution to the end customers for free and charge for the customization, consulting and end user training. This is an absolute win-win as this tests out your products core engine and generates that much needed capital to fund your final product journey.   

Focus on the global markets: There is one thing you absolutely need to be aware of, as a start-up there will be many times you will get misused. Especially in some growing markets, a few customers might just reach out to you to get their POC’s done, try out things at your expense especially stuff which their teams are not capable of doing. This might take a lot of your efforts and all of this while there was never any intention of providing a serious business out. Beware of this scenario and except canned demos, profile presentations, competency displays everything should be charged from the beginning. As a thumb rule if there is anything which takes more than 8 person hours of your effort charge it out, the best route to avoid this kind of scenario is to focus on global developed markets. In our personal experience we wasted a lot of time in the local markets and we are yet to see a meaningful deal materialize.

Funding Platforms which you should absolutely seek: There are some platforms where you should absolutely have your start-up represented, these platforms will connect you to several potential funding opportunities. Even if you don’t get funded through these platforms they will prepare you for the D-day, some of these platforms include F6S, angel.co, 500.co, seed-db.com, Techstar, ycombinator.

Top saving techniques: A penny saved is a penny earned, there are several potential techniques which can save you a bomb in terms of expenses and help you sustain till your product launch. 

• Cloud: Use everything Cloud and cloud versions of your software’s too, in this category try google cloud as it is the most economic cloud options
• Incubators: Use Incubators and shared spaces as much as possible, these save time and a whole lot of money. Almost every big city have several of these mushrooming every day.
• Refurbished laptops: Many big organizations scrap out there laptops every three years, there is a fair chance of getting a heavy duty decent enough laptop during these events as Refurbished laptops. You just need to connect with the Operations team for any of these biggies.
• Outsource: Outsource everything except your core competency, you should outsource accounting, payroll, HR, facilities and food too. This segment too saves lots of money and time.

Finally do not much put a lot of effort chasing funding till you are not actually ready, a VC is like a guru in the Indian spiritual system he pops up when you are readyJ. Till then March on and march on my friend!