It doesn’t seem that long ago when I was starting my first company. It started as a side gig, and as I recall, it stayed in “side gig status” for probably a year while I used funds from my first job to keep my side gig breathing. It sounds like an oxymoron, but there was so much to do before I even started.
I remember needing sales and business training, presentational material, legal contracts, business advice, supplies to build my work product, software subscriptions, phone, rented workspace, etc. People kept asking me for my “piano” and only later I realized they were asking for my P and L! I ended up with a year-long education on what was needed (or not needed) to truly put my company on track for growth.
I did my best to add value that entire year. Consequently, I had a much better company after one year, ready to receive investment, with just enough clients to have a story to tell. That in itself was a lesson on when to launch. I learned that I needed to turn my vision into a model. A concept or idea was not enough.
That season taught me a few other lessons, too, that I would like to share with you.
Producing that first customer out of thin air.
When you first start out, you may find yourself with no clients and challenged to produce something out of nothing. You need to create, build and/or present your concept or business offering to someone close to you who would be willing to give you feedback, ask you questions or even help you get started.
You will need time to practice your product or service with others and get their input in order to improve it and learn about some of the hurdles you will need to overcome. Ultimately, you need to find out if someone you know will also be willing to become your first client, customer or user. In exchange, you will give them your utmost attention, because they are also your first review, your first referral source, your first customer support, etc.
|Chris Conant (far right) and his partner, Christopher Perry (middle), sold their first company, The Composition Group, a branding and web UX company at the height of the dot com industry (March 2000) to their new owners, D. Sharma and K. Stephens.|
There are people who care about you and want to see you succeed.
I once heard this expression from a successful entrepreneur: “I didn’t get to where I was without others opening a few doors for me.”
Do you have friends or family members that could become that first client? Could they just give or possibly lend you enough money to get your concept ready as a model for others to experience? I know it takes money to make money, but your company needs to be at a minimum level to start taking on investment. You need to create enough of a substantial presentation to win a client or an investor. It’s difficult to recommend where to save costs here (because those first dollars are precious), but also, the first impression of a product, service or even an investment pitch is so important.
Who do you trust to help you?
I would look for those who are willing to sacrifice something on their end to benefit you. Perhaps it’s their time or their expertise. Are they in your life because they really care about your success, and they have no motive other than to just help you? Perhaps you can trade products or services for some of the initial support you may need (legal, marketing, etc.).
When it comes to investors, you must demonstrate that you have thought through a plan for revenue. You’re presenting a business model, not just a good idea. If you don’t know how to put a business plan together, try searching for a business plan/presentation from a company that is similar in industry, size and/or type and use it as a template and example to base your plan on. It still counts as an exercise in thought.
When communicating, find outside support for your business (e.g., data or reviews), let others see your passion for your product or service, and leave investors wanting more.
Don’t give away your equity. Sell it.
Be very conscious not to give your equity away to friends and family or causes. That’s a later-stage decision. While you may feel very generous toward them for their initial contributions, now is the time to show that you are wise, productive and prepared to lead the business to profitability.
At such an early stage, reserve your equity for selling (i.e., raising capital via equity crowdfunding) to help achieve your plan and growth goals in the first year or two, rather than using equity as an early-stage gift. In fact, it would probably serve you better to find an actual gift that matches the interests of the person who helped you (e.g., swag from their favorite team, a rare collectible for their collection, etc.). They might forget they own 2% of your company, but they will never forget the lengths you went to express your gratitude for them.
Finally, you will be ready to start talking to more friends and family for investment. If your model is sound, and especially if sales have started, you’ll begin to experience some investor interest. A “friends and family” investor that loans or invests funds might receive 1-2% of your equity. And as always, you should find a startup-stage attorney and CPA to help inform your decisions and structure your agreements. With new SEC changes that favor the entrepreneur, I would highly recommend a Reg CF as the SEC-compliant structure under which you raise your capital. This will allow you to publicly promote your offering (up to $5M/12-month period), and in-take almost anyone as an investor to help you realize that dream.
It’s not the destination; it’s the journey.
Not every business makes it to an exit, so do not be discouraged. You never know what market conditions may cause your business to have to pivot. You should be encouraged that you have the unique gifts and skills associated with being an entrepreneur. I hope you embrace what is constant: there are stages and patience and hard work necessary to raise capital and run a business; others will help open doors; and remember to treasure a lifelong tenacity for growth, impact and learning.
Enjoy the journey!
|By Chris Conant|
Experienced Founder, CEO & Investor
Chris Conant has had a 20-year career as a branding and digital marketing founder and CEO having exited three times over. He is now the founder of Resound Structured Capital, a management company for investments in startups, real estate and structured crypto instruments. The Resound SPV Fund is not only still open, but is the largest investor in Fundify, and its most raving fan. Chris lives in Dallas, Texas with his beautiful wife Nancy and can be reached via resoundstructuredcapital.com.
This blog article is published by Fundify, Inc. The comments and opinions expressed within are those of the interviewee and do not reflect the opinions and beliefs of the website or Fundify, Inc.