Being an entrepreneur is on trend nowadays. In the History of Opportunity, we’ve seen a sequence of successful money-making careers; sequentially, the warrior, the craftsman, the merchant… But it was after industrialization that the potential return for top value positions sky rocketed. In the past 50 years, we’ve moved from the Mad Men of the 1960s to the Mark Zuckerbergs of the 21st century.
Entrepreneurs are the new warriors, craftsmen, explorers, corporates riding the fastest wave of creating value in their respective era. With the democratization of technology and information, it has become easier to build your own company and move upwards in life.
Only, if you pull the right levers.
In this article, we’ll delve into four options for entrepreneurs to raise and manage money in order to break even, survive and, eventually, become the rockstars of today. But first, a disclaimer: there is practically no easy, neither quick way in the fundraising roads. It is a long-distance race and Unicorns are extremely scarce and rare. And now, off we go:
- DEBT. In this option, the good news is that you’re not using your own money and, most importantly, you are not losing ownership of your company, which is brilliant. There are downsides, though. Evidently, payback conditions stress the company’s cash flow while risking your guarantors, too. Nevertheless, the trickiest part is that borrowers will only care about getting the money back and not about the success of your company.
- SHARES. As opposed to the previous option, in this path, there are no monthly instalments; however, that is countered by a loss in ownership of the company, which, at the same time, echoes in a loss of decision control. This last point, though, needn’t be critical since both investors and founders share the same goal of increasing income and achieving success for the company. But truth be told, success is often measured differently among stakeholders and while investors usually look for an exit or a merge, founders are rather attached to their “babies”.
- PUBLIC GRANTS. The tightest path of all and the one which offers the highest security. This is the perfect option for early-stage companies since it involves no capital loss and no loss of ownership, either. Furthermore, there are numerous grants in different fields and geographic levels. The counterpart is, by no surprise, the extremely high competition for a very limited offer – typically less than 1M per grant. And the final risk is to become a prisoner of this system relying forever on the wheel of public grants.
- BOOTSTRAPPING. Last but not least, here’s the hardest way of them all. Bootstrapping, originally “pulling oneself over a fence by one’s bootstraps” refers to undertaking an absurdly impossible action. Translated to the startup jargon, this means using the founder’s own resources and tightening belts, the American way. Therefore, no dependencies, no control loss but on the other hand, a high risk for domestic life and further difficulty to recruit top talent and large sums of money.
Now, the ball is on your court to evaluate closely your startup’s nature and choose your fundraising path wisely. Whether it is the hard one, the other hard one, the tight one or the hardest one, remember to be flexible but not naive and always expect double the time for any strategic plans.