Of course startups need money to grow. However, is betting on one card and persistent search for a wealthy “guardian angel” is the only way to finance the venture?
Far too many initiatives are ended at the idea stage, perhaps brilliant, but still only the idea. Their authors focused all their attention on looking for an investor, convinced that only this way will let them to bring their plan to life. So instead of refining the details and moving forward on their own, they lost a lot of time and energy to persuade the successful people, that their idea made sense. This is a very bad strategy. Here is why:
No one will invest in your fantasies
The investor is not a good Samaritan, who just waits for creative young people in need to appear at the doorstep. People with significant financial resources are usually businessmen who are interested in further ways to multiply their wealth. Therefore, looking for an investor at the very beginning of the project - without the prototype, without feedback from the test audience - you are doomed to failure. The idea alone will not sell anything. Of course, there are philanthropists who just want to give some money to somebody, but there are very few of them, and expecting you to hit one of them is simply naive. A good time to look for the investor is when your project is alive, it works well and brings a real income, and you just need a cash injection to expand your business.
The idea behind the startup is usually the innovation associated with the rapidly growing IT market. What is fresh today, tomorrow exceeds the term of validity. That is why it is so important to introduce the product as soon as possible. Are you sure you want to devote this time to looking for an investor instead of marking your position at least with the prototype? Remember: when you are traveling to the other side of the rainbow hoping for a gold pot, others develop the product and take over the market.
There is nothing for free
It is worth noting, that by accepting someone's money you give them the control. Founders of startups are often former employees who have enough of having a "whip" over themselves, as well as “young wolves” who never wanted to get the experience of having a superior. Surprise! In the investor you find yourself ... a boss. It’s not possible for a person who puts money in your business to expect nothing in return. By investing, your “guardian angel” will want to get the control over the process, progress and effects. Is this a bad situation to be avoided at all costs? Of course not, in a great part it depends on the type of person you meet, but it's worth asking yourself: is that what I want? Investors not only put a pressure for a fast return on inputs, but also very strongly interfere with the product itself. Such action can lead to a complete change of the concept, or even the fall of the project. Moreover, it may happen that the success of the venture will not turn to be your own victory. Unfortunately, there are situations in which a successful business is taken over by the investor, and the originators lack any decision or executive power.
It's not the 90's. Indeed the functioning of startups is difficult - due to the high competitiveness and market volatility, however, it is worth remembering the second, brighter side of the coin. Nowadays startup creators have a great range of free tools and platforms available to build prototypes, as well as customer acquisition and product promotion. At the start you usually don’t need tens of thousands. That is why at the beginning, do everything possible to finance your idea on your own. How? You will receive some valuable tips in the next text.