If you are like most developers, you dream of the idea of building the next big app that will cover the cost of your retirement. In the article, Freedom through Apps: The Road through Independence, I cover a few up-front considerations needed to begin the reality of building such an life plan. If you can’t be the lone wolf developer; because it’s too much work, or it’s too risky, or you like people too much and you want a road to financial freedom, how do you get there?
The other vision that people chase is the idea of creating a startup company, getting funding, and making it big. While certainly this has worked for some folks, it’s not the path that most successful folks take. As it turns out the hidden work of building a startup is more than most folks realize.
Fail First, then We’ll Talk
Imagine for a moment that you’re sitting down with an investor who has enough money to invest in your company. Imagine that you’re willing to give up any amount of ownership and you’re ready to deal. However, instead of the investor working on terms and negotiating for a percentage of ownership for an amount of money, you hear “Fail first and then we’ll talk.”
The reality of getting investment dollars is that investors invest in people and not ideas. They invest money where they believe that the person will make it work no matter what the cost. They invest when they believe the investment will pay off and not in a win-the-lottery type of way, but in the kind of way that they expect people will want to buy milk tomorrow. So investors are looking for two key things in a person. First, they want to know that you know what it’s like to fail. They want to know that you’ve learned what you’ve done wrong before so you know not to make the same mistakes.
They’ve all made their money—or lost their money—somehow and if they’ve still got money, they’ve learned their very expensive and painful lessons. They want to make sure you have, too. That starts with having failed before and it ends with having skin in the game.
The second thing investors look for is you having some risk. They don’t necessarily want you betting your house on the business, but it’s got to be personally painful to you as well if it doesn’t work. They know that you’ll work differently when you’ve got things at stake, too.
This may sound like the familiar Catch-22. You can’t get a job until you have experience which you can’t get until you get a job. Well, as many job seekers have found out, that’s not true. You can work for community organizations for free or you can find people willing to take the risk. There are ways to make job seeking without experience work. The same is true of creating a startup.
The best part about getting experience at a startup is that there are many other people who have the startup dream too and they need help. Perhaps you join an organization and sign up for someone else’s dreams to learn the ropes get some experience, and prepare yourself for what it means to get funding and try to become successful.
You may not make the cover of a magazine for being the youngest ever self-made billionaire. However, if you’re willing to put in the work to learn what you need to know, you’ll find the process of finding funding much easier.
Finding funding is a full-time job. It’s not make a few calls, get a few introductions, and suddenly you’re getting offers for investment. Most folks find that it takes months, if not years, to get funding for their ideas. They need to learn how to build investor pitch decks and how to have hard conversations about ownership.
Funding consists of two key components. First, knowing investors and also knowing what you’re selling.
Investors are people who have money. Either they made it—or someone who made it gave it to them. They’re not investing for fun. They’re investing to make a return on their investment. They’re often willing to take more risk than someone investing in the stock market—but they expect better returns as well. In other words, they want to believe they can make money from working with you.
Investors are all unique in the way they behave. Some are interested in equity, some are really non-traditional lenders and aren’t that interested in equity. They’re also unique in the amount of involvement they want in day-to-day operations. Some won’t want to hear from you and others will want very frequent updates. Some will want to plug in accountants or other professionals they trust—and others won’t.
Knowing What You’re Selling
However, there are some things that are common to all investors—they want to believe they’ll make money with their money. That means getting paid back their investment as well as earning a profit. To do that, they’re looking for investments where the organization has proven that they can make something work. They want to know if you can demonstrate the behavior change in the target market that you’re looking for. If you don’t have a specific goal and a demonstrated way to accomplish it, expect an uphill battle to sell investors that your idea is better than the 20 other pitches they read this week.
Be clear on what the behavior is that you’re trying to change, that you can change it, and that you can prove it.
Starting the Startup
If you’re convinced that you have what it takes to start the startup—do these things before you hang out the shingle:
- Network with Investors: Learn to speak the language. Learn what’s important and what’s not. Become a social anthropologist on the species of investors so you know how to talk with them.
- Develop a Thick Skin: You’re going to be told no. Your first pitches are going to suck and you’re not going to get your funding. No problem. Talk to the next investor, and the next, until you’re successful. There will be a lot of barriers.
- Don’t Forget What You’re Doing: Before you hang out the shingle, you need to be able to effectively communicate what you’re trying to do. You can refine the message once you’ve started, but you should be able to articulate it pretty quick.
Startups have their own hard work and challenges and once you’ve got an investor the road gets much easier—but the struggles aren’t over. You’ve still got to learn how to iterate your development of apps. That’s the subject of the next article in the series.
About the Author
Robert Bogue is a thought leader and an engaging presenter who speaks at events around the world. Rob has been awarded the Microsoft MVP designation a dozen times. He is also the author of over 25 books, including The SharePoint Shepherd’s Guide for End Users: 2013. Rob is a developer, an IT Pro, Architect, organizational change agent, pilot, comedian, and friend. Follow Rob’s blog at http://www.ThorProjects.com/blog/. You also can email Rob at Rob.Bogue@ThorProjects.com.