Don't raise money, is what people have been telling me for years!
Get valuable tips and inspiring insights delivered to your inbox on Tuesday every two weeks ! Don't raise money, is what people have been telling me for years!Finance 101 Part 1: Bootstrapping should not hold you back from raising money, this is why !Welcome to the 94 new subscribers joined this week 🥳. 🛎️ Announcement: As we keep growing at an incredible pace, we want to connect indie hackers and part-time entrepreneurs with the tools and resources they need to help them build their businesses sustainably. So if you have a product or service that can help them reach their goals, grow their revenue and their audience, and work smarter. Find advertising opportunities and Sponsor slots in here : You can connect with us on LinkedIn, where we share our insights on business, SaaS products with our community. IntroductionStarting a business is like climbing a mountain - the hardest part is reaching the summit, which is creating something people actually want. This is a first issue of a three part series about Finance 101: Today we dive deep into:
🚀 Why bootstrappers need to raise money ?Bootstrappers: yes, you had traction and more than 10 paying customers… cool, right ? You need a UI/UX designer ? Are you going to do all of this ALONE ?! 🤨 Nope ! You validated the idea and have a good MVP but scaling needs money and this is where the S*ht hits the fan. I will give you an example:
Typical scenario: As a bootstrapper, you will probably buy a cheap domain name and spend a whole year learning SEO and content strategy. As a result, you will scale your business with 1% while your competitors will grow exponentially in the field. You did what you can, but you FAILED. ⌛ When to raise money ?YC says if you can raise money, you should do it right away. However, Hotjar gives more context to this saying and splits it into three scenarios depending on which phase your business is at:
Scenario A: Launching phase
Scenario B: Growing phase
Scenario C: Scaling phase
Investors also need persuading. Usually, just a product that they can see, use, or touch will not be enough. They will want to know whether there is product market fit and if the product is experiencing an actual growth. How much growth ? Usually, 10% per week for several weeks is very impressive! ⌛ How money is enough money ?Startups should aim to raise enough money to reach profitability, so they don't have to raise money again. This will make it easier to raise more money in the future and survive without new funding if the funding environment gets tight. One way to determine the optimal amount to raise is to decide how many months of operation the startup wants to fund : A rule of thumb is that an engineer costs about all-in $15k per month. Must-know facts about funding:
Tips :
Bonus:
📑ConclusionBefore raising money or doing anything else, it is essential to recognize that you are not just a developer but a business owner. As a business owner, you will be managing someone else's money, and they may not always agree with your decisions. They might ask you to do other stuff or go another route that you don’t like. It is also important to keep in mind that as you grow, you will be responsible for the livelihoods of your employees, and their survival depends on your success. This was the first part to get you familiar with raising money. In the next issue, we will further explore:
Ask me questions! Don’t be shy, I am willing to answer and chat, maybe grab some coffee if you are around. Just reply to this email.
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