Three Seeding Lessons for Sole Proprietorships

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Many owners of brand new small businesses and startups find it difficult to raise capital early on or don’t want to go to outside investors, so they can hold onto the equity for as long as they can.

Some never raise capital. Instead, they fund growth through cash flow, a process known as seed. In recent years we’ve even seen bootstrap “unicorns” – $ 1 billion companies that have made it through self-financing, rather than hitting the venture capital circuit.

Priming is a refined and intuitive art. Many investors look to companies that do this successfully. “We find CEOs to be very strong operators,” says venture capitalist Christopher Yip, partner and managing director of Real Estate Technology (RET) Ventures in San Francisco. “They have this entrepreneurial spirit and this vision of what a business can become. The execution is very strong.

Recently, I was able to speak with Yip and other experienced experts and entrepreneurs in this space for their advice on best practices.

Here are three seed tips you can apply to your business, whether you’re running a one- or two-person operation or a scalable startup.

1. Make sure you can execute your business plan even without a cash injection. “If the business doesn’t work unless you raise capital, you get stuck in a trap,” Yip explains. “You need to know that if you don’t have access to capital, you still have a sustainable business plan. “

2. Do your homework. Lucas Rotter, CEO and co-founder of Valcre, an end-to-end appraisal software solution for the commercial real estate industry, and his three other co-founders launched the La Jolla, Calif., Based company with capital of $ 13,000 that they contributed. personally. “We never invested any additional capital in the business,” he says.

One of the reasons they were able to do this was Rotter’s familiarity with the industry. He had previously built a software platform for commercial real estate broker Colliers International and spent eight years discussing with experts what was important to commercial real estate professionals in a valuation platform. “We started a business that really leveraged and captured a lot of the knowledge I learned from them,” he says.

The company, founded in 2016, has taken off and now has 30 employees. Although he is open to raising venture capital, he says, “We didn’t need to take extra capital from outside to move us forward faster. “

3. Find the right product early on. Brent Steiner, CEO of Engrain, a Denver-based software company specializing in mapping and property survey technology, is a seasoned initiator. Although he has run the company, which now employs 135 people, in various forms for 15 years, he has only raised the first and second venture capital fundraisers in the last year and half.

“Finding the right product for the market when priming is very important,” Steiner says. “If your software meets a real need, then someone will be willing to pay you for it, even if it’s a minimum viable product. Then constantly get and iterate on feedback. So you won’t take such high risks with other people’s money.

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