Nov 2 2009

You should be looking for clients instead of funding

Most of people that had a great or not so great idea decided to sart looking for funding, in order to support the transformation of the idea into something real, those people are wrong, they should be looking for interested clients instead of funding.

Some of the people i know, start looking for funding options under the VC umbrella even before having something to show, without personal funding, i believe that this is not the way it should be, have the following options under your eyes before start looking for corporate funding.

Self funding

First you need to prototype the product, for that your could use self funding. Use some savings on your own, probably you want to do this on your spare time. Another option, is to get some friends helping out to build the product, in exchange for a small stake of the business, you’ll not get money but you’ll get help, is there worst or better ?

Grow from revenue

You’ll get into a stage that you will need more money, either for product investment or for start dedicating yourself 100% into your product/business, for this bet on revenue funding. Now that you have already a product, you could start to partner with future clients, sell pre-payed packages, that will fund your development. STart a partner relationship, not a client relationship.

Raise funds from friends and family

Friends and family are a direct channel to get funding, after you have a product materialized and a projection of revenue, your friend and family will be interested on helping you out, in exchange for a small stake of the idea, you should consider this. Bringing more people in, will make you have more people giving you advices and controlling your decisions, that’s not unhealthy.

Only after this 3 funding ways got dry, you should be looking for the investment sharks, that will help you in exchange for a considerable percentage of your business.

My advise is, start by focusing in your product and only later get worried about dealing with corporate funding. Of course this works better when your product prototyping/development doesn’t evolve a complex and long time process.

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