Funding your startup without VC $
By: Ryan Handby
Tags: Freelancing, Software Development, Startup, Venture Capital, Startup Lessons

Photo by Damir Spanic on Unsplash

As someone with an entrepreneurial spark there is nothing more exhilarating and challenging than building your own product or company. Solving problems for your customers and colleagues is highly rewarding and is at the core of how most successful startups grow up from their fledgling beginnings.

Building a startup is a lot like juggling many simultaneous tiny fires and trying not to get burnt by too many of them. Oftentimes you have to choose for yourself to take a small burn financially, reputationally or to your inner ego in order to protect your team or your product.

Startups in general should be a long term thought in your mind if you are wanting to embark upon the journey. You shouldn’t be thinking “this will be a good lifestyle for 3 to 4 months” because any meaningful company is only scratching the surface in that time. You also shouldn’t be thinking “venture capital will fund our company and get us to that next milestone” because invariably it will not, if your company cannot survive without venture backing there is a very small chance that it would survive with a capital injection.

And you may be sitting there saying “but heaps of companies get funded that is definitely the path for my company” and you may be right but in order to get to that point you first have to build a product worth anything. There are very few companies that get backed pre-product, pre-market and pre-mvp grinding. The only outliers are extremely unique ideas that are no-brainers (it is very unrealistic to believe your company has never been thought of before) or you are a serial founder with a previous successful exit or two under your belt.

So what do you do if you are a founder working on a great new idea, have a few customers and aren’t yet making enough to live entirely off the business if you haven’t yet found a financial partner? You have a few options, some easier than others and it is usually a combination of these that will lead you to pushing your startup further down the path. I have been using many of these myself.

You can attempt to find a financial co-founder. Someone to buy into the company with you that can hopefully also help you build the business. This idea shouldn’t be your first choice especially if they are there as a silent founder offering nothing but money to the idea.

You can get a loan from family, friends, a bank, a debt provider or your credit cards. Many startups have started this way and many startup founders remember the days when they were balancing everything on the back of numerous credit cards. I would tread in this area with caution because if you mess this up you are going to have a lot of unhappy people coming for you and creating distractions while you are trying to execute on your mission. If you have to use this option, make it small, make it extremely infrequent, always have a payback plan. Don’t be a gambler.

You can take on a small side job that doesn’t take up your entire week to keep funds flowing in while you are building your products and finding your customers. Make sure if you do this you read any / all contracts very carefully to ensure you don’t end up losing out on your startup entirely due to fine print about working on external projects and/or idea ownership. I would avoid any standard employment scenario if you are serious about your startup but for some people this may be an option. You could also park your startup idea for a few months while you build up some savings in order to re-embark on your journey if situations are looking dire.

You can use your previously developed skills to work as a freelancer / contractor and set your own hours, clients and focus industries. This is the most reliable way to keep your income going while building your startup as it is entirely controlled by you and also helps with developing your ability to sell and create client relationships which open many more doors for you in the future. Along with this if you work directly with the industries your startup is aiming to serve you can learn a lot about your future customers by interacting with them and asking them about your ideas along the way this helps a lot with idea validation.

Better than standard freelancing is a concept I like to call purposeful freelancing. This concept involves looking at the features and current needs of your startup and taking only clients that align with those goals in order for you to get paid to build features that work for both your clients and for your startup at the same time. Examples of this as a software engineer might be user login systems, payment integrations, CI/CD pipelines, automated deployments, email queuing systems, social integrations, event sourcing architectures, notification engines, audit trails and many more. Nearly all larger projects need these and if you are careful with your contracts and the way you conduct your business you can often find times that you will be able to use the same or at least very similar iterations of this code in order to propel your startup forward.

This concept involves looking at the features and current needs of your startup and taking only clients that align with those goals in order for you to get paid to build features that work for both your clients and for your startup at the same time. Examples of this as a software engineer might be user login systems, payment integrations, CI/CD pipelines, automated deployments, email queuing systems, social integrations, event sourcing architectures, notification engines, audit trails and many more. Nearly all larger projects need these and if you are careful with your contracts and the way you conduct your business you can often find times that you will be able to use the same or at least very similar iterations of this code in order to propel your startup forward. Selling smaller products and/or coaching surrounding them that you come up with along the way. There have been many times the purposeful freelancing idea above has worked in the opposite direction where stuff that I have created for my own products gave me plenty of ideas that could be sold to other companies, examples include automated deployment systems and management ideas and communication styles. If your company is having a problem so are THOUSANDS of other startups. You can sell your skills for a significant hourly rate to solve those problems. Don’t feel bad about charging for your time you are doing a service to help these people and if you are delivering on your promise you are a head and shoulders above your competition. Other ideas in this vein are info products, webinars/seminars and 1 on 1 coaching to teach the lessons you have learnt to the up and coming future “yous”.

Just like any task in the world of startups the funding muscle needs to be worked out regularly and updated as you move towards being fully sufficient from the business itself. If you neglect it you may find your run way is significantly shorter than you first imagined and your great idea might end up in the pile of many other great ideas that are left to rot never to see the light of day as people return to their day jobs.

If you needed a reminder or permission to take stock of where your startup is at financially well then today you have it :).