How Do I Find Funding? (Secret Track inside)

Virtually on a daily basis, I am asked this question. Or at least some variation of that question.

If you are asking yourself this question, I want to offer my advice. You can add it to your collection of advice (you can also check out Guy Kawasaki, Paul Graham, and so forth, folks who have lots of opinions and insight on fund raising).

My advice is this. Bootstrap your business. Even if you intend to look for funding, behave as if you will never get it.

Consider the situation of most investors (your average person buying stock) – they go to a stock brokerage service, log in to their account, and buy what their friends, advisors, or cat tell them is going to be the next biggest thing.

But there are millions of people buying stock, and when millions are buying, it is easy to rationalize your purchase. Besides, while it is true that Microsoft could vanish tomorrow, it is pretty unlikely. More probable is that during the period you hold Microsoft, it might lose you money. But, because of the hordes out there, it seems much less likely. Everybody else is doing it, why not me?

Investors in your business are buying your stock – I know it sounds stupidly simple, but it bears saying. But, because you are new, bold, and untested, no one has heard of you. So there are not, in fact, millions lining up to buy your stock. There is just that one person you are pitching.

That person has no evidence to rationalize the purchase of your stock. Oh, other than your charm, business plan, and the latest news on your industry. You lack the momentum represented by media, employees, customers, suppliers who all have a vested interest in your success.

So it is safe to say that, unless you’ve started and sold your own company, have highly specialized skills and experience, or are connected/come from money, you probably will have a heck of a time raising funds.

Which brings us back to bootstrapping. The best evidence of a high potential product or company I am aware of is revenue. If you can sell your product, you can fund it through revenue. So get out there, bust your tail, develop a product someone can buy, and win your customer.

Then your business plan will have teeth – and you’ll have a back up plan if you don’t land a big VC.