In my previous blog entries focused on early stage startup challenges I discussed the necessity for entrepreneurs to self fund their own startups. The following are some tips for how an entrepreneur can build and launch a company with minimal funds.
Open Source - We have moved away from proprietary software products to the free software world of open source. Open source products allow an early stage company to leverage the work of a team of developers and beta testers(customers) for no cost(or very low cost) to the startup. If your product or service is software based this is a great way to get product in front of consumers quickly with minimal development expenditure.
Cloud Computing - Cloud Computing has obviated the need for large and expensive hardware purchases. The concept is simple. Use someone another company's hardware to run your business. The cost is based on "usage". Usage is defined as data storage, CPU and bandwidth. This is a great way to get your business or your web site hosted for a fraction of the cost of doing it yourself or having a hosting center take care of it.
Beta/Community Programs - One of the biggest challenges for startups is to get validation and direction for their product or service. Engaging end users in a beta program is a good way to get free feedback on the product design, function and quality. Beta testers are extremely tolerant of a shaky early release product as long as their suggestions are taken seriously and they see steady improvements in the product or service over time. These same people will eventually become customers if you treat them properly and you make them feel that they are part of an elite first viewer participant group.
Leveraging The Future Value Of Equity - Although the idea and concept you start out with may have no immediate monetary value the future company based on that idea could have significant value. Savvy individuals will get this and will participate in helping you launch your company in exchange for a piece of the company.
Web Site Development - Irrespective of what your product or service is all companies should have a website that describes the product or service, acts as a launch pad into the product and provides updates for an ever curious Internet community. Putting up an initial web site these days is easy and inexpensive. There are plenty of online services that will provide you with starter templates to get your message out, accept credit card transactions and track your traffic. The most important thing a company should do is get the e-mail addresses of the visitors so you can continue to market to them in the days, weeks and years ahead.
E-mail Campaign Services - E-mail is still a great and inexpensive way to reach out to existing and new customers. There are a number of e-mail campaign platforms that will provide you with the tools to create your own e-mail campaigns and maintain mailings lists. In the initial stages of your company your email campaigns should cost you very little because your lists will be small. If your e-mail lists do grow to substantial size(100 of thousands) then this will be a great problem to have.
Corporate Programs - Many large and established companies with great products and services realize the future value of startup company. They know that if they provide startups with access to their products and services in the early stages of development they will most likely continue to use the company's products and services once the startup becomes successful. It is a shrewd strategy based on the fact that once you build your company around a product and service it is difficult to switch. Mircrosoft and Sun Mircrosystems (now Oracle) are just a few of the big guys that like startup companies. Take advantage of their somewhat self-serving offerings remembering that you may be committing to a long term relationship with the company.
Business Partnerships - Business partnership opportunities are still around and possibly growing because of the recent economic downturn. An existing business needs products and services to put into their sales channel. Developing a new product or service can be expensive for an existing company. If they can get a startup to build a product the existing business can use in their channel they may fund part of the development in exchange for a share of the market. The existing company may also see the startup as a new sales channel for its existing customers.
Social Media(blogs, Facebook, Twitter, Linkedin, YouTube etc.) - Every company despite their size can obtain a significant amount of consumer attention by using free social/viral media channels. Building a presence in these environment is not expensive. The key to successfully using these services is to use them in tandem to get the "Social Media Effect". There is no better way to put a company on the map and to acquire customers then through social media.
Search Engine Optimization (SEO) - Natural search is still a potent and powerful way to attract consumers to your business. SEO is a bit of a black art but there is some science to it. Text is better than graphics, meta tags still have value, recognizable key words in the text matter, links to your site from other sites increases the importance of your site and traffic matters. The more traffic to a property the better the ranking.
IM/Skype/Freeconference.com - Loss the traditional phone set up it is too expensive. If you want to contact someone or have a conference, etc. use a free IM service, conference with Skype or use Freeconference.com if you really need to use traditional phone lines. This is especially important of you are going to do business internationally.
Sweat Equity - Even though the items I have listed are all great ways to keep the cost of launching your startup down they all require "sweat equity". Value = sweat equity + investment. Nothing comes without a cost. This means that startup founders have a unique challenge of having to invest their time for no cost to grow the company.
Scaling Up and Scaling Down - The other challenge for entrepreneurs is the ability of the co-founders to demonstrate that they can "scale up and scale down". Many of the items described require an entrepreneur to be a CEO one day and a web developer the next. Have the suit and tie ready along with the jeans and a tee-shirt. Multitasking will keep the labor costs down.
Conclusion - There are many ways to keep the cost of your startup down enabling you to launch it with very little initial financial investment. The inexpensive startup phase does require a co-founder to be versatile taking responsibility for a number of different and unrelated tasks. Sweat equity is one of the key ways to control the cost of startup. the more you do yourself the cheaper it will be to launch your company.
Video
Open Source - We have moved away from proprietary software products to the free software world of open source. Open source products allow an early stage company to leverage the work of a team of developers and beta testers(customers) for no cost(or very low cost) to the startup. If your product or service is software based this is a great way to get product in front of consumers quickly with minimal development expenditure.
Cloud Computing - Cloud Computing has obviated the need for large and expensive hardware purchases. The concept is simple. Use someone another company's hardware to run your business. The cost is based on "usage". Usage is defined as data storage, CPU and bandwidth. This is a great way to get your business or your web site hosted for a fraction of the cost of doing it yourself or having a hosting center take care of it.
Beta/Community Programs - One of the biggest challenges for startups is to get validation and direction for their product or service. Engaging end users in a beta program is a good way to get free feedback on the product design, function and quality. Beta testers are extremely tolerant of a shaky early release product as long as their suggestions are taken seriously and they see steady improvements in the product or service over time. These same people will eventually become customers if you treat them properly and you make them feel that they are part of an elite first viewer participant group.
Leveraging The Future Value Of Equity - Although the idea and concept you start out with may have no immediate monetary value the future company based on that idea could have significant value. Savvy individuals will get this and will participate in helping you launch your company in exchange for a piece of the company.
Web Site Development - Irrespective of what your product or service is all companies should have a website that describes the product or service, acts as a launch pad into the product and provides updates for an ever curious Internet community. Putting up an initial web site these days is easy and inexpensive. There are plenty of online services that will provide you with starter templates to get your message out, accept credit card transactions and track your traffic. The most important thing a company should do is get the e-mail addresses of the visitors so you can continue to market to them in the days, weeks and years ahead.
E-mail Campaign Services - E-mail is still a great and inexpensive way to reach out to existing and new customers. There are a number of e-mail campaign platforms that will provide you with the tools to create your own e-mail campaigns and maintain mailings lists. In the initial stages of your company your email campaigns should cost you very little because your lists will be small. If your e-mail lists do grow to substantial size(100 of thousands) then this will be a great problem to have.
Corporate Programs - Many large and established companies with great products and services realize the future value of startup company. They know that if they provide startups with access to their products and services in the early stages of development they will most likely continue to use the company's products and services once the startup becomes successful. It is a shrewd strategy based on the fact that once you build your company around a product and service it is difficult to switch. Mircrosoft and Sun Mircrosystems (now Oracle) are just a few of the big guys that like startup companies. Take advantage of their somewhat self-serving offerings remembering that you may be committing to a long term relationship with the company.
Business Partnerships - Business partnership opportunities are still around and possibly growing because of the recent economic downturn. An existing business needs products and services to put into their sales channel. Developing a new product or service can be expensive for an existing company. If they can get a startup to build a product the existing business can use in their channel they may fund part of the development in exchange for a share of the market. The existing company may also see the startup as a new sales channel for its existing customers.
Social Media(blogs, Facebook, Twitter, Linkedin, YouTube etc.) - Every company despite their size can obtain a significant amount of consumer attention by using free social/viral media channels. Building a presence in these environment is not expensive. The key to successfully using these services is to use them in tandem to get the "Social Media Effect". There is no better way to put a company on the map and to acquire customers then through social media.
Search Engine Optimization (SEO) - Natural search is still a potent and powerful way to attract consumers to your business. SEO is a bit of a black art but there is some science to it. Text is better than graphics, meta tags still have value, recognizable key words in the text matter, links to your site from other sites increases the importance of your site and traffic matters. The more traffic to a property the better the ranking.
IM/Skype/Freeconference.com - Loss the traditional phone set up it is too expensive. If you want to contact someone or have a conference, etc. use a free IM service, conference with Skype or use Freeconference.com if you really need to use traditional phone lines. This is especially important of you are going to do business internationally.
Sweat Equity - Even though the items I have listed are all great ways to keep the cost of launching your startup down they all require "sweat equity". Value = sweat equity + investment. Nothing comes without a cost. This means that startup founders have a unique challenge of having to invest their time for no cost to grow the company.
Scaling Up and Scaling Down - The other challenge for entrepreneurs is the ability of the co-founders to demonstrate that they can "scale up and scale down". Many of the items described require an entrepreneur to be a CEO one day and a web developer the next. Have the suit and tie ready along with the jeans and a tee-shirt. Multitasking will keep the labor costs down.
Conclusion - There are many ways to keep the cost of your startup down enabling you to launch it with very little initial financial investment. The inexpensive startup phase does require a co-founder to be versatile taking responsibility for a number of different and unrelated tasks. Sweat equity is one of the key ways to control the cost of startup. the more you do yourself the cheaper it will be to launch your company.
Video
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