Even if you’re on the right track for getting investment, getting to that level is often easier by using other stepping stones.
"Consulting is the oxygen of our company. We reinvest what we earn into building our vision." - Eyram Tawia, Co-founder of Leti Arts
"We couldn’t start by saying it’s commercially fundable. Once we’ve established a track record, then that’s possible." - Matt Wainright, Co-founder of Standard Microgrid
Nearly every founder is going to have to fund their idea at some point in its early stages. This could mean, for example, using your salary, getting grants, or borrowing money from friends or family. Let’s look at some of the funding options that gave these tech founders their start.
Here are some specific examples of how founders used bootstrapping to get themselves to the next step.
Askwar Hilonga used his own salary from his university to make the first prototype of his water filter. Once he had that prototype, he could use it to enter competitions. After getting into the Africa Prize shortlist, he had enough credibility for his university to be willing to offer him an interest-free 7,000 USD loan to take his project to the next level. That loan allowed him to create another 10 water filters, progress which led to him winning The Africa Prize and the 25,000 GBP which comes with it. The money moved his business forward even further, such that he’s recently won a 350,000 USD grant to continue growing.
Askwar used his own funds to create something which could then unlock more funding opportunities. At every stage he focused on using what money he had to get his company to the next level.
If your skillset and that of your company are appropriate for consulting, it can be a great source of flexible funding to either get you started or sustain you in dry periods between other sources of funding. Often, this means the money earned from consulting is immediately reinvested into the company, sacrificing profit for growth (the classic trade startups make in the early days).
Eyram Tawia makes that trade with his gaming company Leti Arts. He was unable to get funding at the early stages in part because of a lack of understanding for what his company was trying to accomplish. So he had to get creative. For him that meant using consulting as his company’s sole source of revenue while it got off the ground. That may not be a recipe for meteoric growth, but it gave the company what it needed to begin releasing games and bringing in their own revenue.
Grants are often the bridge between bootstrapping and consulting, and larger investment. This is because obtaining a grant usually requires you to already know your product, business model, and future plans in some detail.
Matt Wainright’s company Standard Microgrid knew there was no way it was going to receive any grants before they had a good idea of what their product would look like, how it would function in the field, how their business planned to grow, and most of all, how it would fit into the goals of the foundations giving the grants. This led the founders to first invest their own money into demonstrating their commercial potential. Applying for grants from the start would have been a simple waste of time. They then did extensive research, made a detailed list of potential grants, and used a funding model to quickly make decisions about where to invest their time and resources. The result was that they managed to get 3 of the 20 grants they applied for and obtain $250,000 - enough funding to get to the investment stage.
Can you relate to the stories we told here? How is your experience different? We'd love to hear from you. Your questions and comments are what will help us make better lessons in the future.