This week, we discuss options for funding a business without dilution (i.e. giving up equity). From pitch contests and grants to consulting on the side, we walk through all the different options and weight their pros and cons.
- There are a few main ways to fund a new business without giving up equity:
- Consult or work a normal job to make money and funnel that into your business
- Enter pitch contests and apply for grants
- Take on debt
- Make enough revenue directly from your customers to pay your expenses (this is ultimately what every bootstrapped company needs to do, it's just a matter of how long it takes to get there)
- It's helpful to understand the different capital needs for different parts of your business. Some things might be risky and uncertain. Others might be proven. Rather than thinking "I need $x to run the whole business", break it down by expense type because some might be a better fit for debt (e.g. scaling proven customer acquisition channels) whereas others might need other types of funding (e.g. paying employee salaries).
- For each type of funding, consider how much you'll get out of it relative to the time it takes to get the money. The most obvious thing you get out is the funding, but there might be other benefits that are harder to measure. For example:
- Winning a startup pitch could help you earn credibility for things like raising money from investors or finding early employees.
- Making money directly from customers might be harder at first, but the effort you're putting in is moving you in the right direction vs. something like consulting which is probably unrelated to your startup's business model.
- This episode of the Out of Beta Podcast discusses ways to think about raising debt
What is Startup to Last?
Two founders talk about how to build software businesses that are meant to last. Each episode includes a deep dive into a different topic related to starting, growing, and sustaining a healthy business.