How much money do you need to get started?

… You want to raise just enough money to solve a small problem for even a smaller set of customers to start with.

A lot of ventures start with a dream, a vision; to solve a problem in a specific Ruby Throated Hummingbirdway. The dream could be a INR 100 crore product or something as complex as an ERP on the web to a even more complicated, a Hospital Information Systems (.. search engines? they are easier to build these days).

The vision cannot be achieved in 6 months or even 2 years — Takes 5-7 years on an average to build an INR 100 crore company. So you want to start now, and want to start small, chiseling your idea, refining as you go, adding feathers in your cap and changing gears and accelerating as you move.

First, zero in on a handful of customers and a specific problem the customer may have. Do not worry if others mock you for building a feature & not a product. You know your destiny. You know where you want to reach. Validate what you have built. Give the customer something useful so that he can pay for what you have built. Iterate on your product.

There are a lot of examples where the companies started small and began by solving just one small problem and then morphed into gorillas; from companies selling PCs — to cloth merchants now with fully backward integrated perto-products chain.

A large amount of money spoils you, ties you up with your own experiments and forces you to deliver a product which does not have any takers outside your laboratory — You are forced to linger with the experiment because now you have a large amount of an external investor’s money and do not have guts to tell him that it is not working out. There are numerous examples. There are only a few brave entrepreneurs who took $5m only to tell the board in less than a month about change in the business model.

When you are starting out, you are building something and proving your hypothesis. The moment someone starts paying for what you are building, a part of the hypothesis gets proved. You continue to iterate.

Think 6 months, 3 people’s expenses.

Think 6 months, 2 people’s expenses.

Think the amount of first tranche you need to deliver to your first customer.

Think about knowing the sales process yourself before hiring a sales expert.

Think doing zero dollar marketing before doing SEM campaigns.

Think writing the code yourself before hiring a developer.

… start thinking about raising big money after your customer trusts you with his money.

(The thumbnail is of a Ruby-throated hummingbird. These are solitary. Have one of the highest metabolism, and as part of their migration, they fly non-stop across the Gulf of Mexico, a distance of at least 500 miles. Pic courtesy)

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  • Neetish

    agree mostly, u can also add save by using open source alternatives instead of proprietary software or pirated version of expensive software

  • ankit

    “… start thinking about raising big money after your customer trusts you with his money.”

    Spot on Indus. Customers don't read your business or revenue plan. If your customer can't invest in you – no one else can.

  • You had me at the opening line
    “You want to raise just enough money to solve a small problem for even a smaller set of customers to start with”

    Simple and to the point. Loved the post. More entrepreneurs need to realize that it's OK to start small and wait for things to grow and not just keep eyeing for some VC etc to fund them while their Idea is still in their head

  • indus

    Well said Ankit. The moment you have your customer's money, you have locked in your past winnings. Now, only future bets are stake!

  • indus

    True. The lure of a large institutional money and the romanticism around it gets the entrepreneur caught in the fishing hook! .. and this is India, there is more romanticism than the money!!

  • indus

    Startups have to optimize on the resources and yes, as you said, use of open source is right on the money.

  • vidyavyas

    truly said..too much money in the very early stage spoils the entrepreneur…the toil and the pain element has to be there and a list of creditors too so that the pressure of monetising(and hence ways to modify the product and let it evolve) is always there…selling has to be done by the entrepreneur before having anyone else to sell

  • Succinctly put! I absolutely agree – you can't build a massively scalable product useful for 1000 customers on day 1 or even 10. Start small, iterate rapidly. That's the key IMHO 🙂

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  • indus

    Like the pressure of having a creditor. You are forced to perform to pay him back.

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  • Perfect, simple and to the point blog! If you're a start-up, you may find http://theindianstartup.com interesting.

  • Naushad Shaikh

    thanks this 1s Really Usefull..