Sun, Jan 06, 2013
By now it is common wisdom that startups get cheaper and cheaper to build (mostly because infrastructure costs went way down). Yet I am puzzled by the fact that startup after startup after startup spends a significant amount of energy and time on raising angel rounds which are often in the $10k to $50k range. And pay with rather significant amounts of equity for this privilege.
Now — if you get an amazing network with your investment, that might be worth it (I am sure Paul Graham or the Tech Stars folks are worth every percent of equity you give them)… But generally I would argue that this is not true. And building a network of your own is easier today than it was ever before.
But here’s the real puzzler: Why raise $20k for expensive equity in the first place? You really can’t scrape together a bit of money from family, friends and fools? $20k seriously makes a difference for you in terms of your startup? How about you try to sell what you’re building (I know — a novel concept these days) or subsidize your startup with odd jobs, begging, sleeping on your friends couch and generally living off of ramen?
Or is it that you don’t believe in your idea that much after all? Is the risk too much for you? Do you think startups is this nice little lifestyle thing? Would you feel bad if you would need to go to your parents and tell them that the $20k they gave you for your awesome idea was for nothing? That you failed?
Do you really, really want it? If so — you will make it work. And find the money to bring your company into a shape which allows you to raise real money.
P.S. Here’s my personal story — I invested $150k into my first startup. Money which I begged from my family and money I made by working endless hours in a computer shop during high school and college. I later raised about $2.5 million in VC funding for the company. We sold the company — literally in the last minute before the market completely collapsed in 2000. And I made zero dollars back (liquidation preferences are something I talked about before here) — which was extremely painful as I needed to go back to my family and tell them that I blew it. But I believed in my startup. And I paid my family back — which took me years. If you really want it — you make it work. One way or another.