I’ve never seen a B2B company get to anything much under 18 months. — Steve Wood , B2B Serial Entrepreneur Startups are difficult. It can take anywhere between 6 months and 3 years to get a business off the ground. To succeed, . founders have to be ready to go the distance This means , being resilient, and extending your startup runway. shortening your time to product market-fit I started HireVoice, my previous startup, with little to no money and no income stream. Quickly, I had to cut spending and use my line of credit. Although having little to no money keeps you , the stress bears down on you. I can’t say I was completely thinking straight; . It was clear that I had to find ways to increase my ability to take risks. hungry the financial pressures are one of the core reasons why I shut down the business To help founders go the distance, I created the following list of ways to extend startup runways with their Pros and Cons: Using Personal Finances to Extend your Startup Runway Your Own Savings : In some ways, tapping into your savings to fund your business is the solution. You keep all control and become your own investor. Since you’re working from cash on hand, you don’t pick up debts, and have a clear picture of your time horizon. This can be a good path however… Pros ideal : Self-funding your startup means you’re not accountable to anyone for the way you spend your money. This can mean spending on the wrong things and over-spending, but also not knowing when to pull the plug because of your ego or other reasons. At the end of the day, if your investment doesn’t pan out, you can be left with significantly less savings and little to show for it. As the saying goes, it’s always better to spend someone else’s money than your own. Cons Credit : Using credit gives you the flexibility to decide when you spend and go beyond your own cashflow. It typically doesn’t require approval and can be used very quickly. Pros : With yearly interest rates as high as 25%, it’s quite likely that it will take years to repay the . In fact, you’ll probably pay multiples of it. Although some founders have managed to fund their business on credit card debt, it’s definitely not the wisest long-term way to extend your startup runway. Cons investment Bank Loans : Unless you’re willing to mortgage your house or other assets you own, bank loans won’t be an option. Banks rarely fund early tech projects because you need liabilities to get a bank loan. Pros : See above. Cons Extending your Startup Runway with Revenue Startup Revenue : Startup revenue is the healthiest way to create your startup runway. By getting clients or prospects to for your product, you can start your business with money in the bank, and Pros pre-pay a pretty clear sign of product-market validation : Depending on the industry and the market, pre-selling may not be an option. Clients may want to see a working solution before making a purchase. More so, to create sustainability, pre-selling requires selling big-ticket items, which may take a long time to sell. All in all, this is the healthiest option because it incorporates validation, but you may need a secondary source of income to get there. Cons Keeping Your Job : Guaranteed income. There’s a lot of built-in waiting time in the early days of a startup. Keeping your job means you can experiment with the comfort of having a full-time wage. As you build and get validation, you can gradually reduce your working hours. Working in an organization is also a great way to find business ideas (Read: ). Pros How to Find B2B Business Ideas in Your Workplace : Because of work (days don’t always end at 5pm / weeks are tiring) and other life and family commitments, it can be difficult to get a lot going with a full-time job. Splitting your attention can make it difficult to get real results. With a job, you’re almost always choosing between building your startup and your other personal obligations. This is one of the reasons why starting up is easier when you’re young. Cons Consulting : Consulting is one of the most common ways to extend your startup runway. Depending on you expertise and rate, it can provide a good cash influx when needed. By picking your clients carefully, you might even be able to (e.g. ). Pros turn your consulting gigs into a successful product business clientstrapping : I funded my work on and with consulting. Although you can find ways to get better control over your schedule (e.g. blocking days, only accepting short mandates, etc.), consulting makes it difficult to control your schedule and maintain a high level of focus. It’s also very difficult to turn down money and mandates, which can really sidetrack your business. Cons Flagback Psykler Secondary Product Revenue : This is how I’m funding my current startup, ; a mix of book and and some affiliation revenue. This reduces the financial pressure, allows me to capitalize on assets I’ve already created and, because sales are very transactional, it gives me freedom to focus on building Highlights. Pros Highlights course sales : The secondary products take time to build, and surprise, they also take time to maintain (products don’t sell themselves!). If you don’t already have a secondary product that sells, it can mean taking a step back to take 2 steps forward. More so, as your secondary products start to make real revenue, you’ll be tempted to focus exclusively on your secondary products. Cons Micro-Tasks & Micro-Projects : You can do micro-tasks or small projects — logo design, user testing feedback, quick translations, quick development projects, etc. — to earn a side-income. Because of the short duration of the projects, you get better control over the workload and schedule. (Note: Bart Boch created a great list of micro-projects ). Pros here : Depending on your background and past income, this can like working for nothing or cheapen your personal brand. Although there be less client management, meetings and waiting, it’s also quite likely you’ll have to deal with those. Cons feel should Investment Money from Friends & Family : Friends and family members will be more likely to invest because they know you better than other investors. Because they’re not professional investors, their expectations of return and the pressure they’ll give you will be a fraction of the pressure you’ll get from investment firms. This can both be good and bad. Pros : If your startup works, your friends and family make money (Great!), but if it doesn’t… you run the risk of damaging important relationships in your life. Startups are risky, , beware of raising money from family and friends. Cons a lot of them fail to scale past early adopters Angel Investors : There are than there are investment firms. Angel investors can be a nice hybrid between friends and family and an investment firm. Because they often were entrepreneurs themselves they can provide helpful mentorship. Angel investors generally don’t have the same timetable and expectations of return that VCs do. Pros a lot more angel investors : Raising capital from angel investors leads you down a certain path for your business. It comes with expectations for growth and progress. Since angel investors are often solo, they’ll rarely become the lead investor of your funding round, so you’ll need to supplement their investment with other investors or other types of investments. Cons Venture Capital Funding : If your business has the potential to grow big and you want to go fast, venture capital money might be the best path forward for you. There are a lot of , so you can find a good partner who will open doors and guide you to the finish line. Pros good VC funds and accelerators in B2B : Not everyone is a for VC funding. Even if your business qualifies, it may be a mindset you don’t wish to follow. Raising capital from VCs means going for a home run with all the pressure and expectations that comes with it. Raising this kind of capital is a move you’ll have a hard time coming back from and it can be a significant distraction (raising a round often takes 6+ months of work). Cons fit Independent and Funding Bootstrapper-Friendly : These past few years, there have been a growing number of investment vehicles for bootstrappers and lifestyle entrepreneurs. Funds like , and invest money without the expectation of a liquidity event (e.g. an acquisition). Their investments come with mentorship from other bootstrapped entrepreneurs. Pros Indie.vc Earnest Capital TinySeed : Although these funds’ expectations are different, raising capital takes time and has an impact on your business’s trajectory. Seeing that these options are fairly new, I’ll wait to see how they work out for the founders partaking. Cons Grants & Contests : Grants can come in many shapes and forms. By positioning your business for various grants you can raise equity-free funding. Often times, this money will be tied to certain processes and activities your business needs to do. For example, in Canada you can get grants and credits for hiring people of certain backgrounds, including certain multimedia components, doing research & development, etc., etc. Pros : Most grants and contests won’t bring in a ton of capital. Since the pitches will all be different, it will require a lot of work and preparation to get several grants. In some countries, it will difficult to keep on top of all the grants and subsidies your business can benefit from. Cons Alternate Funding Vehicles : The funding landscape is changing quickly. has been one of the most interesting new options for founders these past few years. With equity crowdfunding, you get to raise capital from hundreds of, often smaller, non-professional investors. This usually means maintaining complete control over the decision-making processes as equity owners are more like backers than traditional investors. Pros Equity crowdfunding : Equity crowdfunding has not been legalized in all countries and jurisdictions. It typically works best for business to consumer products with strong brands as it requires a lot of campaigning to attract investors. It can be a huge distraction for your business, so you have to consider the pros and cons. Cons What’s the Best Way to Extend your Startup Runway? The best way for will depend on: you The nature of the project; The expected duration (note: it always takes longer than expected!); Your expected time commitment and availability; Your financial situation; The expected velocity (e.g. ); how fast do you want to go? The financing options at your disposal (e.g. not all businesses can raise VC money) The right solution will most likely be a mix of the options above (e.g. R&D, grants, angel funding). For each option, you’ll need to consider the tradeoff between risk and velocity. and No matter the approach you choose, . The more similar their situations, the easier it will be to guarantee that their individual incentives are aligned. make sure you consider the individual runway of business partners and the key employees all 👏 Clap and get other people to discover it! Enjoyed this story? Want to Build Products Businesses Need? The Lean B2B Course 🎥 includes 5 hours of and on the . High-Quality Video Lessons, Worksheets Templates expanding Lean B2B book The Lean B2B: Build Products Businesses Want Video Course Curious? Sign up for our Free 2-Week Email️ Course 👇 Further Readings on B2B Customer Development I publish articles on B2B customer development every week : on my blog Can The Lean Startup Techniques Work in B2B? How Much Time Do You Need to Get to Product-Market Fit in B2B? 16 Tips for Better Customer Development Interviews in B2B Originally published at leanb2bbook.com .
