imho
MB
Jake Stichler
Hobo
JeepersFinancing A Startup - Not always a good idea
I wrote a piece for Lending Club this week with some tips on alternative ways to finance a start up company. It got me thinking about my exit strategy for my current business and if I have one. I do…but it’s still at minimum a year or more away, and that’s assuming everything goes perfect. It also assumes I have the cash to keep going the next few months. And also that the IRS doesn’t crush me.
Awhile back I think I was going to give myself til the first quarter of this year to decide to just get a W-2 job, or keep going with my business. I’m hoping to do a hybrid. Get a half-time W-2 Job, and keep my business running, and hopefully going strong the rest of the year. We’ll see.
Back to financing a start-up. I traded equity in my company a few years back for start-up cash. It’s a decision I regret now. It’s a big reason I didn’t just bankrupt the business last year. I have investors that expect a return, and I have to provide that for them. It’s actually one of the biggest drivers of my motivation right now. They gave me money, I screwed around not doing business activities (ie, the day trading), and I don’t want them screwed just because I was an idiot.
I wish I had never raised any money, but I did. I can’t change the past, and I need to focus on the future….and that means making more money. Lots more…
I'm 300K in debt. Gulp. I'm 24 and day traded away a fortune. Now I'm trying to crawl back to zero. Why not subscribe to my RSS feed and join me on this journey. You can also subscribe via e-mail. I appreciate tips and feedback! ~ DebtKid
on April 10th, 2008 at 5:59 pm
Like you experienced, trading equity can be either a good or a bad thing. It’s good if you trade equity for cash or services from someone who can really help to launch your business. It’s also good in the fact that it puts you on the hook for another person’s expected returns, which may make you work harder.
It’s bad if you just get cash and dont work hard at maximizing the return on it. It’s also bad if you give away equity, didnt really need to do so, and ended up hitting a home run which you now need to forever share the profits.
Tim
TheMoneyKings.com
on April 10th, 2008 at 6:55 pm
Your investors gave you money for your business and you day traded it? Why declare personal BK when you could have just shut down the business? You’re in the soup now though so might as well look for the way out. My exit strategy for anything I do is success.
on April 10th, 2008 at 7:00 pm
@ Jim - No, I used the money in the business, I just didn’t use it wisely, and didn’t focus as much on the business as I should have because I was doing my other stuff.
Success is a good exit strategy for sure.
on April 11th, 2008 at 8:19 am
I think you may be too generous with your investors. They took a risk by investing in your company. . .some of that risk was that you would not be focused 100% on the business. If the circumstances were reversed would the investors use similar logic? For example if the business was immensely (sic?) profitable would they say “well we only invested a little so you can keep most of the money”.? Most likely not.
Investors lose money in risky startups.
Is your company an LLC? Are you personally liable for any of the investor’s money?
I applaud your loyalty to your investors but wonder if you are being too nice. Maybe it’s not too late to bankrupt the business, take a stable w-2 job for a little then restart in a year? Or perhaps I am just too conservative. .
Tom
on April 11th, 2008 at 10:17 am
I agree with Tom.. you are very loyal to your investors… I am working on a start up too, so I guess I would be in a similar spot sometime in the future…