Be an Angel, Invest in Your Own Startup

In most cases, successful entrepreneurs fund their very first startup on their own, from their own sources. Here are real-world, anonymized examples of how and from where entrepreneurs got their own startup capital:

1. Squirrelled away money from their full-time corporate salaries before quitting and starting their own business.
2. Used severance pay from redundancy from their corporate job.
3. Hired on a 3-year contract, but completed the project in half the time. Had at least 18 months fully paid to explore new business ideas and was rewarded a bonus on top of all that for doing such a great job.
4. Worked full-time to keep bills paid and lights on, while working on the beginnings of a venture part-time in the evenings and on weekends.
5. Started selling products on Day 1 and re-invest profits into the business.
6. Sold real estate properties (which was where saved money was stored) and invested the proceeds into their own business.
7. Liquidated retirement savings and invested it into their own business.

We rarely hear about these stories. Perhaps they are not newsworthy enough for media reporters to write about them. Perhaps we take it for granted that the vast majority of businesses are started with the founder’s own resources. Yet if we take a moment to ask entrepreneurs about their beginnings, we discover details that can make the difference between doubt or action. Sometimes it’s the everyday stories that inform us about the next steps we could take or validate a path we’re planning to follow. Hearing about the true source of startup capital for more than half of new businesses helps us get started on the right footing prevents us from wasting time, barking up the wrong tree.

There are things that entrepreneurs can do to prepare to invest in their own startups.

1. Save money and save early. Start building your own startup capital early by saving 10% of your income, then 20%, then 30% and more if you can. It is especially important for women to start early given that, on average, women make 80 cents on the dollar compared to men.
2. Think like an investor. Closely related to the first point above, build up your own capital, invest a little in your own venture, then reserve some for follow-on investment in your own venture. Having capital set aside means you can continue to invest in your venture and leverage it into additional equity capital or financing from external investors later on, if you so desire. Presenting an opportunity to investors to co-invest with you, the founder, is a far more compelling and attractive story.

Follow me on Medium for insights, stories, and opinions on funding businesses.

Follow the Pique Ventures blog for impact investing resources.

In the meantime, you can check out some of my answers on Quora about entrepreneurship.