Monday, November 3, 2008

Capital Before Starting


Ron Conway, best known for making very early and very lucrative bets on Google and PayPal, but he's also known as one of the most adventurous angels of Bubble 2.0, and has invested in 130 companies since 2005. His advice: “I would tell (entrepreneurs) to keep their day job until they got one year of funding, and if they couldn’t get that, then they’re not meant to start that company right now."

One year of funding - even for a local business will be a great help in this tough climate. If you start your business undercapitalized from the start, you are constantly on the edge for cashflow. If business starts slow, or you have a couple early accounts pay slow, you can find yourself out of business.

The point is: if the first year of a new business is the most dangerous for continued success, why not have sufficient resources for that first year?

"But Brad, I am going to get a loan (or have investors, etc)."If you have no capital, and you are unable to save funds sufficient to get started and through the first year of your business (and your business plan should show how you are going to get there!) - then why would a banker loan you the money? What have you shown him or her that would prove to them you would be a good loan risk?

Showing discipline is a great advantage in our tough economy, and also increases your credibility with others you need on your side.

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