How to get initial funding (in the $5,000 range)

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Permalink Reply by Dave Churchville on September 23, 2009 at 1:20am

Hi Justin,

This may not the type of response you're looking for, but here goes...

If you truly believe in your idea, and more importantly, in your ability to execute it and to persist when things get tough, would you look back in 6 months or a year at your present self and say "I understand why you didn't move forward - $5000 is a lot of money", or would you kick yourself for not being more resourceful and determined?

In my experience, bootstrapping is a great way to validate your commitment to an idea or a project. If you're not willing to take a small risk (sounds like $5K would hurt, but not ruin your life if things didn't work out) on your own idea, it's going to be tough to get someone else to throw some money in. And it's probably just as tough to get $5K as it is to get $50K unless you've got some friends or family members who are excited to help you.

Maybe to put this into perspective, treat this like any other investment:

Ask "If I invest $5000 into this business, will it pay a return of more than that in a timeframe I can live with?"

In your case, that might mean you need to recoup $5K + finance charges within 2 years as a bare minimum, or maybe it's more like $20K to feel like it was worth your time, effort, and risk. If you don't believe you can, then maybe you're not working on the right project.

Hope that helps.

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Permalink Reply by Justin James on September 23, 2009 at 5:08am

Dave -

Thanks for the reply! It's about what I've known for a while, but I'm hoping to avoid it. I've been breaking my back the last few months to bring in some extra money. My wife and I had a discussion about it last night, and she beleives in this enough that she told me to go ahead and put the expenses on the credit card, and if it doesn't pan out... well, I can take the time I would spend on the business and spend it with my freelance gig instead. It's funny, my wife has no clue what I do, how I do it, etc., but she has a lot more faith in me sometimes than I do. But I am also a lot more conservative about debt than she is, too. :)

J.Ja

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Permalink Reply by Jason Cohen - blog.asmartbear.com on September 26, 2009 at 4:37pm

$5000 is small enough to raise from "family and friends." Remember this includes people like your doctor, dentist, or accountant.

A good way to start the conversation is to say that you're already putting your own money in. If you're asking for money and you're not putting in, that sounds fishy.

(Yes, you and I know that "opportunity cost" means you're already putting in a ton of money, but that's not as tangible for other people.)

Some people with disposable income (like those professions) enjoy something exciting and interesting like investing in a "cool tech startup." $1k-$5k is not a lot to spend to brag to your friends that you're in the ground floor somewhere.

Make a pitch that gets them emotionally excited about the idea. Remember that most people aren't technical so you have to argue the marketing/business merits.

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Permalink Reply by Justin James on September 29, 2009 at 3:04pm

Jason -

I thought about that. unfortunately, I am the "richest" person I know, other than my father, and I cannot go to him for funding on this particular project (personal reasons). Most of the rest of my friends and family come to me for loans and such. :(

It's all good, I have some freelance work I do (writing), I've been opening the firehose on that for the last few months, and I guess I'll just keep it open to fund this project. For now, I am putting the expenses on my credit card (my wife and I discussed this, and she is OK with this), and using my extra writing money to pay it back quickly.

Thanks for the suggestions!

J.Ja

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