Keep it cheap. will you start Up

Whether you are starting a dog washing business or founding the next search engine empire, you will be more successful if you keep it cheap. Do not quit your day job so you'll have time to develop. Don't get those expensive offices. Don't invest in 5000 flyers or a telephone book advertisement. Make every possible effort to start your business on a shoestring, and to grow it only with the revenue of paying customers, because that is how you maximize its value.

A start-up, is by very definition, an untested business. It doesn't have the product, customers, delivery methods, management team or pricing strategy required to succeed. What it does have, is freedom.

If an entrepreneur keeps his nascent business cheap, he has the freedom to design a solution that combines customers, products, services, prices, delivery mechanisms and one or more hardworking professionals to create a ‘virtual machine’ that makes more money than it spends. He has the time required to come up with a business that has the capacity to grow. He can keep his prices low, his quality high, his company under control.

If an entrepreneur burdens his ‘baby business’ with high fixed costs, like his own salary, a big office, with big marketing expenditures, long before it is in a position to repay those costs, he makes it harder for his business to succeed. In a worst case scenario, entrepreneurs burn through their life savings, their credit, and burden their business with debt it will never repay. An entrepreneur in this position has lost the ability to define his business so it suits the market it must live in. In effect, he has cut it off from the people it must serve in order to survive.

Your business should be very solid before you accept outside investment for it. The more financial partners you have in a business that isn't up and running, the more difficult getting the company up and running will be. When you are playing with other people's money, they have expectations about how you will spend it. Since they have never run your business successfully, their ideas about where the money goes and what it does might be entirely wrong. If you want to have the freedom to make the right choices, let them keep their money until your business is ready to grow.

For example, the boys from Google created the earliest versions of their internet search engine while working in a dorm room. Their startup costs were very low and no one was taking a big pay check. Only when they had a proven technology that had demonstrable value, did they accept outside investment. They were looking for money to scale their business, not to develop its core technology. This is why Google's founders are some of the wealthiest young men in the world.

As an entrepreneur you may feel like you are doing it all wrong when your office is in the garage, and your idea of a business lunch is a pasty down at the pub. The truth is, what your business needs is your best efforts to create a cost effective, streamlined, easy to deliver, scalable product or service that meets the needs of its customers. It needs you to get it into the black as quickly as possible and to keep it there.

Doug Richard is the CEO of School for Startups and original BBC2 Dragon

Novel approach to funding your start up

A short article from Francine Hardaway's Blog "Stealthmode Blog" on a novel approach to bootstrapping your start up, "GET MARRIED" by the way Francines Blog is an excellent read and would recommend her to anyone interested in start up a business:



Novel Way to Fund a Startup

by Francine on August 25, 2009

I met Drue Kataoka through her blog, Valley Zen. Only later did I find that she, a recent Stanford grad, is from a distinguished Japanese family and is an accomplished artist in a traditional Japanese medium. And that’s the end of my expertise about things Japanese. But I got a message from Drue yesterday saying she was getting married on August 29th, and directing me to the First Ever Startup Registry.

Drue and her fiancee are starting a company called Aboomba. It is, of course, in stealth mode, which is why she thought I should know about it:-) They have decided that they don’t need silver and crystal and all that stuff I’ve had in boxes and shlepped from home to home without unpacking since the days of Mad Men. Instead, they have asked their friends to give them gifts like food for their engineers ($273), lunch for a VC $291), a desk upgrade for a developer ($49.90), an hour of a Silicon Valley lawyer’s time ($385) and so forth. In this way, they have backed into a budget:-)

Maybe I should have just tweeted a link to it, but I thought the letter from the bride and groom was worth re-printing:

The big date of August 29 is quickly approaching. However, we realized we didn’t need blenders, silverware or champagne glasses. So we had two options: (1) create a wedding registry with objects that we don’t really need, but are expected for the retail-industry-imposed Wedding Registry Ritual or (2) surprise everybody and do a different kind of registry—one that is non-conventional, humorous, genetically Silicon Valley—and actually useful.

We decided that the future belongs to the bold—so below is our non-conventional Start-up Wedding Registry. As you know, besides starting our life together, we are excited to be starting a new Internet company called Aboomba. Instead of buying us silverware and kitchenware, we invite you to participate in nurturing this new internet organism. The list below is as much humorous as serious—you could indeed be feeding engineers and accountants; providing coffee, pizza and online hosting.

Many of you are entrepreneurs, venture capitalists or start-up lawyers yourselves.so you have already been through the exciting experience of starting a company and seeing it grow. We promise that Aboomba’s journey will be filled with creativity, excitement and drive. You will see your contributions to this non-conventional wedding registry result in building an amazing company!

But the wedding is not about the presents—it is about the guests who have played a special role in our lives. That’s why, the last and most important item in our registry is Your Attendance—the gift that we will cherish most.

Is this not the cleverest way to fund a company using the traditional 3Fs? What friend, family member, or fool can resist contributing under these circumstances? Like all early stage investors, you’d be buying a pig in a poke, but at least you would be kicking off the marriage in a useful way. Did you really like giving traditional brides a single china dinner plate or a blender?

And a word of advice to entrepreneurs: next time you think you need to raise money, perhaps you should just get married.