The Entrepreneurial Race Part 1: Getting to the Track
March 14, 2013 6 Comments
This is the first post in the “Entrepreneurial Race” series. Click here to read Part 2: Picking a Pit Crew, Part 3: On Your Mark, Get Set, GO!, and Part 4: Getting Sponsors.This blog post is adapted from a video lesson I did as a part of middle school entrepreneurship curriculum being put together by the Enactus program at John Brown University. See a teaser of the video here.
Start in the Garage
Owning a startup is a lot like owning a race car: you invest a lot of time and energy building the frame, outfitting it with the necessary parts, and deciding what trade offs to make between weight, performance, and cost. Of course, you also take a lot of pride in what you’re building and enjoy telling others about it whenever you can.
Just like any race car, you will never know how well your startup will perform until you get it out onto the track against other businesses. A race car in a garage is useless much like a business that stays in the idea and planning stages indefinitely.
Of course in order for the car to be able to race, it has to get to the track first. The driver either must drive the vehicle their himself or have someone help him get there. One of the most difficult obstacles for many startups is similar: getting the business from idea to reality. Not only does it require time and effort, but also a fair amount of capital.
Getting to the Track: Common Funding Options for Startups
Just like race car drivers have different options for getting their cars to the race track, there are a variety of options entrepreneurs use to get their products and services into the market. Four common options for funding a startup include:
- Bootstrapping- Many entrepreneurs are choosing to fund their startup through the early stages of development by themselves. Like a race car driver, this saves the founders money in the long-run and usually gets them to their launch without too many problems. However, like Lightning McQueen in the Pixar movie Cars, there is always possibility that your startup could get stranded in Radiator Springs for an extended period of time.
- Angel Investors / Venture Capital- One of the great things about outside investment is the concept of “smart money.” Angel investors are like your friends that have a pickup truck and trailer. They’ll help you get your car to the track, give you tips and advice on the trip there, and be some of your biggest fans during the race. While they definitely would prefer to get a good return on their investment, their primary motivation for investing is the joy of helping someone out and the potential to be a part of “the next big thing.”
- Bank Loan / Government Grant- Enlisting the aid of a bank or government entity to fund your startup would be similar to calling a professional towing service to transport your race car. This option for funding is not as personal as angel investors or venture capital, which can be good or bad depending on the needs of your company at the time.
- Crowdfunding- The final option for funding a startup is relatively new. Crowdfunding involves asking strangers and/or friends, aka “the crowd”, to each give a small amount of money in order to reach a larger monetary goal. In the race car analogy, crowdfunding would be similar to placing an ad on Craigslist for anyone interested in helping to push your car to the track in exchange for free tickets to the race.
Get in the Race!
Whether you are currently in the startup world or you are thinking about becoming an entrepreneur, how you fund your new venture is one of the most important decisions you will make. Carefully consider each of the options, talk to your pit crew (advisors and mentors), and then get in the race! You will never know how your car will perform until you get it to the track.
Learn It. Love It. Live It.
[image credit: Juan on Flickr]