Funding a startup is an age-old problem that is usually solved one of two ways:
1) Taking on investors
2) Bootstrapping & moonlighting
The Problem with Investors:
- Surrender a (probably large) portion of the company.
- Pressured to grow the company as large as possible.
- Raising money becomes someone’s full-time job.
The Problem with Bootstrapping
- Limited by personal savings and generous loved ones.
- Burdened by the stress of being broke.
- Moonlighting distracts attention and slows progress.
- More likely to choose the wrong path because it offers revenue in the short-term.
Our Solution: Consult-strapping!
The way we have decided to finance our company is to take on consulting contracts that are highly relevant to our learning and development goals as a company. These consulting contracts are opportunities to get paid to do market research and validation for our own business. We have very clearly outlined how intellectual property will be shared amongst ourselves, the client and the general public. The revenue gives us enough cash to pay our rent, and invest the remainder of our time developing our own projects & opportunities. The consulting projects also build our portfolio of work as a company and “take risk out” to show that our team is capable. If we ever decide to take on growth capital later, we will not have to give away as much of the company because we have already proven ourselves as a team, and have had time to prove our market and build our solution to a more mature and less risky state.
The Limits to Consult-Strapping
This approach will not work for all businesses. Its hard to start a car company through consulting. At some point, you’ll need a factory. But consult-strapping can get you through the early stage, learning more about your market and building relationships with the right players in the space. It gives you an opportunity to get out in the world and start acting, testing and failing sooner rather than just brainstorming and writing business plans in a vaccuum.