Nearly all startups require some form of investment to get the wheels turning in the right direction. This is absolutely the case when talking apps, app development melbourne and app design. Depending on the type of startup, the financial figure required can be anywhere from a few thousand to a few million.
The hardest part is not establishing the amount you need, but rather how to get it.
When we think boot strapping we think of Steve Jobs in his garage, blacksmith come founder of Patagonia ,Yves Chouinard Not doubt you as they were, had minimal cash at the start of their journey and thus they creating their empire by bootstrapping — leveraging the modest personal finances of the founding team to establish enough credibility to gain a foothold among users and begin attracting investors.
The benefit of bootstrapping is that the biggest commodity at risk tends to be time. Usually you will find that the key founders are overwhelmingly happy to work for little or no reward in their quest for ultimate success.
Lets take a look at some of the Pro’s and Cons
PRO – You answer only to yourself
CON – Much harder to increase you connects and networking
PRO – It much easier to maintain focus when your going it yourself
CON – Development and time to market may suffer
PRO – Your own money and time are the best recipe for innovation
CON – lack of early profits may drive to choose the wrong business model
PRO – Being responsible for your own destiny creates a better work output
CON – Going it a loan means you may struggle to gain credibility.
It is almost inevitable that a fast-growth startups, even if it started out through bootstrapping, will eventually move on to gather funding from more traditional sources, including venture capital firms like Blackbird and individual “angel investors” like Scale Investors
The traditional slow growth bricks and mortar business is rather a thing of the past in the start up world, so in order for early stage businesses to grow at the rate required, they need lots and lots of money.
Upfront capital is often delivered to potential high growth companies in return for a massive pay offs in the long run.
Angel investors also tend to seek smaller deals, prefer to invest in risky, early-stage enterprises, and invest in practically all industry sectors. In addition, many desire a small amount of control in their invested firms and tend to avoid follow-on investments.
Lets take a look at some pro’s and con’s
PRO – Angels can provide the necessary capital for start up growth
CON – Rarely do angels make follow up investments
PRO – Allows business to raise smaller capital amounts
CONS – Angels can be too “return” oriented and cause irreversible damage to the business strategy
PRO – Angels generally bring knowledge and contacts to the business
CONS – They can be costly in respect of equity given
PRO – Generally accept higher levels of risk in respect of investments
CONS – Active involvement from Angels can lead to management issues
Unfortunately Crowdfunding doesn’t have a greatest reputation at present, thanks to the bad publicity generated by dodgy Kickstarter schemes, but when done correctly crowdfunding can be a great way to engage the potential customer base while preserving equity for future funding rounds.
In our experience, crowd funding works best with products and deliverable goods as appose to services. I would also include mobile apps as another favourite of the kickstarter crowd. For some start-ups, crowdfunding has provided crucial capital to getting them to the next stage of growth.
Lets take a look at some pro’s and cons
PRO – You don’t have to give away equity in your business or I.P rights
CON – In some countries you may have to pay tax on pledges that are not donations as such
PRO – You can take advantage of your backers social media connections
CON – A lot of time and effort is diverted to simply running your kickstarter campaign
PRO – Backers and pledges are a good form of market validation
CON – You risk the chance of having your idea ripped off by someone in a better position.
There is no better or best method to choose when raising your next funding round. It is a simple case of horses for courses. Different methods work best in certain situations and a re dependant on factors like, the stage of the start up, i.p protection levels, amount you need, risk levels and time factors.
For more information and a friendly chat, drop a line into the team at Nick Thorn Web Designers Melbourne