Chronicles Of A Local ATL Startup [Chapter 2:My Product, Log 5]
By Shakar Atlan
Topic: Investing vs Bootstrapping
At last my graduation was here, graduation is always a bitter-sweet event. People are either drunk with ecstasy and excitement or emotional from the impending separation anxiety with friends. My main takeaways from my graduation were the completion of another milestone and departing message from the commencement speaker. She encouraged us to take a moment to appreciate the achievements and place that we were in at that time. Then she encouraged ambitious planning for the future and no stress claiming that it would take away our peace. It was refreshing to hear a statement that reiterated my personal convictions which helped me to develop concrete confidence in my next startup step.
Essentially, my next step was to build the MVP or functional prototype with the website sketches that I had developed. Although, I had scratched the surface of website development, the tasks of building a social network with a front and back-end database were vastly beyond my skill set. This begged the question of whether I should seek investments or bootstrap (fund the project myself) my brainchild.
To begin, let me share some perspective on investing. Everyone that has an idea typically desires to pitch it and have it recognized or labeled as the next ‘big thing’. All investors know that most startups regardless of the idea are destined to fail. Consequently, the bar for entrepreneurs has been raised, they have to deliver a product that has already been launched and already generating a large amount of traffic. Of course, opportunities for investment are relative based on your location, networks, and pitch.
“It is not the idea, it is the execution”
“An average of 90% of startups fail”
Incidentally, according to friends and other articles, getting an investment is not all glittered in gold. Entrepreneurs that get an investment are so choked up with the large figures and comma marks on the check that they fail to take the time to fully read and comprehend the contractual deal signed. Investors are the unofficial bosses of entrepreneurs and can control the direction of the startup depending on the contract terms. It’s ironic considering most entrepreneurs are advocates of being their own boss.
”Stakeholders (customers & investors) are the boss for every type of business”
Performing research on investing is imperative. For instance, understanding the difference between equity investments over a convertible note is key securing a good deal. A convertible note is the ideal financial instrument for both parties as it provides more flexibility and takes the guesswork out of the company valuation. Lastly, people forget that investors have a motive too, they want to make money from you. Take precaution in accepting money from sweet talking investors as you will have to pay them back. The ultimate goal of a startup is to release an IPO (go public); this provides the most profitable return for investors, then the company would be owned by the many external stockholders that invested in the company. Economists speculate that high risk investing is the cause of the US economy being in a startup bubble. With the large influx of startups rising and risky investments continuously being poured in them, there will be an eventual collapse of the bubble due to the inability to pay off these loans. As a result, the economy will be affected due to loss of jobs and the bank’s debt will seek help from taxpayers. My philosophies are to never depend on people, build your business yourself, don’t look for quick money, and be comfortable with your own resources.
Prior to saving up funds and making plans to fund a prototype I definitely did not grasp the full concept of pitching or investing. Nonetheless, I knew that I had to have something tangible or practical to show for my idea. With that thought alone, I decided that I would save and invest my own money for this venture. Planning ahead worked out, as I had saved up an amount of funds, along with my website designs ready for use.
Some people will seek to solicit (beg) friends and family to invest in their venture. I had too much pride to ask anyone else; frankly, overselling and soliciting money are quick ways to ostracize friends and family. Trust me, nobody wants to be around the shady business person that is always looking for a quick buck. Whether you are marketing your idea or product consider creative ways to build support through non-financial ways. People will be more willing to help that way. Beginning successful people enjoyed talking about their idea, ignore the haters, then market their product the right people.
”To sell a product appeal to a person’s fellow feelings or desire for change, not their wallet”
With the renewed confidence from the commencement speech, I was ready to put down my own money for this prototype to be built. I could not predict the outcome of the prototype, but I hoped that I could cultivate it into a product without a big personal monetary investment.
