Strange Loops

Starting a company is hard work. The biggest question that you have to answer for yourself is how am I going to make money? Next after that is when am I going to make money? Call it point B. The time between that answer and when you start your company ( point A ) will be nerve wracking. Unless you’re lucky enough to start day one of your company with paying customers, you’ll need to figure out how you’ll get from point A to B as quickly as you can while still keeping yourself afloat. In short, unless your independently wealthy or have a understanding spouse, you’ll need some form of funding.

There’s basically three forms of funding: venture capital, angels ( including friends and family ) and bootstrapping. Well, there are other forms like grants and such, but they’re pretty rare and not really relevant for most startups. For several reasons I decided that venture capital was out of the question for me. That left angels and bootstrapping. Since I had no value whatsoever in my company when I started, I felt taking any sort of investment from an angel wasn’t very desirable. I would have to either take on debt, which I’m opposed to, or exchange a piece of my company. That left bootstrapping. Now, bootstrapping is not for the weak. The time between point A and B is non-deterministic and could stretch on way longer that you would think. Take your best estimate for when you’ll be profitable enough to take a salary and triple it. That’s your floor.

Some bootstrappers run head first into starting a company quickly. They take out loans, max out credit cards and sometimes dump their own cash into the business thinking that by maximizing their starting cash, they’ll shorten the time till revenue starts coming in. I believe this is a quick way to the poor house. Startups are simply too volatile to risk your personal finances ( and possibly your credit ) on. You can talk about having faith in yourself all you want. The simple fact is that for your startup to succeed, you need to be lucky….about 10 times over. The frantic, crazy against-all-odds success stories make for good press, but they’re simply the exception and not the rule.

So, if I bootstrapped, but didn’t fund myself with personal money, what did I do? Simple: Consulting. Unsexy consulting. I’m thinking long term and, in my mind, spending a year or so consulting to fill my business coffers simply made sense. I wasn’t trying to strike quickly or catch the wave of any given fad. I wanted to build a business that endures. To do that, I needed a stable cash runway similar, to an angel investment, that would give me the freedom to build the kinds of products I wanted to build. So that’s what I went out and got for myself. However, instead of talking to an angel and trying to acquire an funding in exchange for some debt or a piece of my (non valuable) company, I’ve spent the first 12 months of 1530s existence scooping up any and all consulting gigs I could get my hands on.

Now it looks like that, 18 months in, I’m able to say that we just closed a round of funding with ourselves. We have the equivalent of an 9-12 month runway in the bank. We did this all without a ) taking on any sort of debt, b ) giving away any of the company and c ) putting ourselves in the position to compromise any of our core values. All three principles that I believed in strongly when I started 1530. Not only that, but we managed to launch Awardable into a private beta thats already generating revenue. To me, that’s a home run.

In closing, believe me when I say that we’re very excited for the next 12 months. Stay tuned for some fun announcements. Oh, and if you’ve made it this far into the post and you’ve got the startup bug or just want to dabble, drop us a line. We’re always on the look out for like minded folks to work with or bring on board.