Co-funding! The future of investment for purpose driven startups
What to do if no-funding is no-option.
Last week it all came together. An idea I have been breeding on for a while became the solution for my own problem. The name Co-funder has been in the back of my mind for months. But after an ‘aha moment’ the name suddenly made sense to me.
Working on my funding strategy
Funding is one of my main goals for this quarter. So I started to explore my funding options and challenge them with my vision, core values and strategy.
Within my bootstrapping approach self-funding, crowdfunding or a friends-family-fools loan could all make sense. They all have their pro’s and con’s.
I already made the decision not to walk the traditional startup funding path (Pre-Seed, Seed, Series A-Z) any more. Although it’s a common route for SAAS startups, bootstrapping Mbassador suits me so much better.
So it really got interesting, when a friend challenged me on this:
“So angel investors are excluded? But what if someone would invest, what would that look like? Could funding fit within your vision and values?”
Two main reasons why not to involve investors
- Choosing for Angel Investors is choosing for an exit. Once you start the funding path there is no way back. You have mapped the next years and getting bought, going public or going broke has to happen. David Heinemeier Hansson (Basecamp) wrote an awesome post to reconsider chasing that Unicorn!
- “When you take money from investors their business model becomes yours.” Steve Blank. You’ll be chasing money, exponential growth and share holder profit over chasing vision, sustainable growth and shared prosperity. Quantity over quality. Only the bravest and strongest founders can resist this shareholder pressure. Medium’s renewing focus is as great example of being that exception for this rule.
Change is the problem!
Angel Investors still are a seamless fit for the majority of founders who have making money as main goal (using purpose as a marketing layer) and use a funding round or exit as metric of succes.
But for purpose driven startups Angel Investors are causing a huge problem. Taking Angel Investor money changes the companies purpose, core values, strategy and business model. It changes everything, that’s the real problem here.
Co-funding is the solution
Don’t take investors money! That is a definitely good advice from an Angel Investor! However, not a solution for all startups.
What if you do need money along the way? What if you can’t bootstrap your way to break-even? Is funding possible without it changes it causes?
A far-reaching solution would be to separate ownership and authority. To make it simply impossible to use your power in purpose of your own benefit. Encode.org is working on a formal organizational model for this.
But I believe there is an alternative route; the informal way. The unwritten rules of behavior that we also know as core values.
What if investors have a founders mentality and drive. What if investors have the same ambitions as the founder(s), using their money as an asset to pursue the companies purpose. Having financial return as a complimentary benefit, not as the primary one.
Could that work?
That should work! If founders can share purpose, vision and core values than founders and co-funders can.
And I’m not the only one believing money should work this way. There is even a Venture Capitalist out there sharing this vision and whom made it it’s business model.
Can it go wrong?
Off course! But isn’t that the same risk you have between your co-founders as well?
To reduce this risk I would suggest to use a Convertible Note (with fixed valuation, fixed time and a go/no-go moment for all involved). So you start working together now and finalizing co-ownership later. Once you work together you really get to know each other!
For me investors aren’t excluded anymore. As long it’s a co-funder, sharing the same vision, purpose and values as I do. When I find a great co-funder I will definitely let you know!
Do you have a co-funder and want to share your story? Please contact me or share in a comment.
1. a person who founds or establishes something with others while using their money as an asset to pursue the communal purpose.
Update | 1 July 2018
I found my co-funder! We agreed terms on a convertible note. This will give us one year to focus on building the product and experience working together.
In one year we both have the opportunity to say ‘No’ to the conversion deal. Any reason is valid at this point! If we both say ‘Yes’, we move forward and finalize the conversion.