So, I heard you want money...

Starting up takes resources.

  • Personnel
  • Working Space
  • Equipment
  • Supplies and Materials
  • Utilities
  • Travel and Hospitality
  • Advertising
  • Services (outside counsel, accounting, etc)

Today, we're talking about strategies for putting together those initial resources.

But first, a note about startups in general.

"Startup" in the media, has lately become synonymous with angel-and-VC-backed, quick-exit, SaaS/PaaS and consumer electronics ventures.

We think bigger than that here in Bloomington, IN.  Some people bootstrap, some people do non-tech businesses, some people build businesses for the long haul...that's AWESOME, and we're talking to you, too!

How to fund your startup

  • Angel Investing
  • Bootstrapping
  • Lead-on Product Model
  • Self-Funded
  • Kickstarter (et al)
  • Spin-out
  • Transfer to Practice

Angel Investing

  • professional Angel investor
  • begging friends and family
  • Often costs $10-80k
  • used to build POC or prototype
  • got a rich family member?
  • high risk means giving up part of the company

Bootstrapping

Self-fund minimal MVP... slowly snowball earnings from MVP into product improvements and self-fund each stage of company growth.
 

  • can be expensive depending on what's being developed
  • if startup is software based bootstrapping only costs time
  • requires bigger initial investment with more complicated manufacturing
  • maker and 3dprinter initiatives are reducing costs

 

You aren't selling off your company to investors, but you have to maintain growth on your own revenue.

Lead-on Product Model

 lead on product instead of MVP of core product

  • small simple product
  • easy to produce
  • easy to iterate
  • Chipotle started this way 

Burritos are easy to make and easy to improve

Skip the Angels

  • build a product with business loans
    or personal capital
  • easiest for a small MVP
  • build a small customer base

 

You own the whole company when you go to talk to your Series A investor!

Kickstarter (et al)

  • similar advantages to skipping the angels
  • crowdfunds first batch of product
  • inexpensive advertising
  • reduces some startup costs 
  • product usually must be something physical
  • ...but you'd better have your R&D in the bag already

Spin-Out

  • Startup as subsidiary of an existing company
  • often on salary from parent company
  • parent company resources (office, office supplies, advisors, marketing department) reduce costs
  • parent company owns some large chunk of the startup

Transfer to Practice

TTP is when you take the product of a research grant (often, but not always a government grant) and spin it out into a startup, a nonprofit, or a community project.  In other words, you take it from the lab to the real world.

  • Researchers rarely want to be founders, but often don't mind advising.
  • Researchers, or their parent institutions, retain most of the IP from publicly-funded research, but funding agencies try to encourage them to push it out into the world. One way to do this is via startups.
  • Dedicated grants are available to help TTP happen, may offset startup costs without giving up any ownership stake.
  • There is organizational overhead: you must understand the system.

Second Startup

  • utilizes resources from existing startup
  • second related or unrelated idea
  • they have ideas they can fund with the payment from the first
  • Virgin is an example 

Bad Ways to Fund a Startup

  • Asking the people talking to fund company
  • encumbering yourself with personal debt
  • mortgaging your house or other assets
  • draining your retirement accounts

Thanks/ Q&A

Funding Models for Startups

By Susan Sons

Funding Models for Startups

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