Where Does Money Come From?
Among the most common questions asked by new business owners, or those contemplating joining the group are several amount money:
- What’s the payoff?
- How much money will I earn?
- What’s the risk?
- Where do I get investment capital from?
To address this, there are dozens of articles available that help you navigate these questions – from How to Fund a Startup, to The Money Map on Canadian Business. The answer to all the questions about where money comes from fall into one of the groups below:
- Friends, Family
- Angel Investors
- Venture Capitalists
However, the question that is not answered by these resources is Do you even need this kind of money?
There’s a saying It takes money to make money that is widely accepted to be true. Personally, I don’t believe it is true – there are ways to make money without pre-existing money. However, the trade off will be that you’ll work hard instead – but if you’re in business for yourself, you’re used to that.
Think of an imaginary person Paul. Paul wants to make money, and he does not yet have any. However, he has an idea for a program that he believes could be the next big thing. Because Paul’s skills are marketing, not development, he believes that he needs money to hire someone to build this program.
However, there are other ways to get someone to build the program. A student might build the program in her spare time as a side job, reducing the cost of development. Alternatively, she may agree to take equity in exchange for her efforts. Paul should seriously consider this option, because it reduces his risk. If he tries to borrow money, then he will have to personally underwrite the loan. This way, if the idea fails to materialize, he doesn’t owe anyone anything.
There is yet another way for Paul to launch his idea – he can start by working for specific clients, addressing their needs, and set aside some of the income from that work to pay for development. This will provide him with a small client-base once he does launch the product, and provide him with seed capital for any expenditures he might need to make. Additionally, working with real clients will provide him with feedback that he can then incorporate into his products.
What is being taught here is not that you don’t need money, but that the money may not be needed now. Sure, it would be nice to have a large office with a secretary, private kitchen, and seventeen employees building cool applications and selling them to eager fans. But you don’t need to start there – you can start with just yourself, and eventually, you may be the owner of a company with 17,000 employees in 20 cities around the world.
Think big. Start small.