When first starting your company, there aren’t many funding options available to you. You’re way too early for banks, and angel investors typically want to see at least an MVP before making a decision. If you’re able to get a venture firm interested, you would have to give up a significant portion of equity, and you’re likely to get a much better valuation if you wait until your company is larger and already selling. Additionally, revenue-based financing and venture debt isn’t an option yet, since you’re pre-revenue. The best choice at such an early stage is to bootstrap your company for as long as possible. That way, you don’t have any loan or debt obligations, nor have you already diluted yourself.
1. Hold off on giving up your day job
While it’s a good idea to eventually go all-in on your startup idea, it doesn’t have to be day 1. Use your day job to build up your savings while you validate your product idea and test the market. Once you’ve gained confidence in your idea, you can use your savings as a sort of runway, allowing you to focus on your product with less stress.
2. Limit your burn
Keep expenses as low as possible, especially if you aren’t able to get outside funding quite yet. This means holding off on scaling your company or hiring new employees until you’re absolutely sure you’re ready. Additionally, keep an eye on unnecessary personal expenses. Limiting your salary and ‘fun’ purchases will add up more than you think.
3. Don’t outsource what you can do yourself
As a founder and first employee, you’re going to have to do a lot of things that don’t scale. And these jobs may not always be glamorous, but they help keep expenses low. Additionally, it’ll require you to learn a lot of new skills. Outsourcing on skills you don’t have is a good strategy when your company starts growing, but when cash is limited, if you don’t know how to do something, learn it.
4. Design a business model that generates cash
As you’re developing your business model, keep an eye on how quickly you can begin bringing in revenue. No cash inflow can end your company before you even get started.