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To Fund or Not To Fund

The timeliness question:  do you give up equity in your startup in exchange for some cash?  Well, the facts show that the number one reason new businesses fail is due to a lack of cash flow so that points to yes if you can't fund it yourself.  I take a contrarian approach. Some people say the irony of funding is that you can't get it until you don't need it anymore. I believe that the vast majority of startups, especially those that are not capital intensive, should not spent the ridiculous amount of time trying to woo potential investors for two reasons:
  1. Spend the time and money investing in your business and talking to customers about what they want in your product/service
  2. Money isn't the answer and it makes you lazy.  Instead of finding creative solutions to your problems, you'll just throw money at them and burn through the cash (and therefore equity) much faster than you would otherwise.
I believe that the best businesses are those that create recurring revenue streams.  Things that you spend the time setting up once, then the marginal cost for selling an additional unit is zero.  An example is a subscription-based web app.  You sign up and until you cancel, they continue to charge your credit card every month. You keep leveraging past successes in this area (in terms of profits, experience, and reputation) to build your next venture and so on, and so forth.  Here's the theory I use:
  • I like to start one type of business:  low barriers to entry
  • I compete and win based on two basic principles:  simplicity and exponentially better execution
You should follow @seanMeverett on Twitter here.
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