There are two ways to build a company – with money and without money. Building a company with money looks like this: Entrepreneur has an idea and goes out to raise capital. Generally they’ll raise equity, selling off a portion of their vision in exchange for the capital required to manifest it. Sometimes they’ll raise debt, meaning they have to pay back the capital, plus interest over time.
Monied entrepreneurs all complain about dilution, interest payments and answering to their board. So why do they raise money? Because money is the difference between a great developer and a decent developer, getting it right the first time instead of the third and delivering the product before you get beat by the competition. Raising money is generally a good trade off.
Building a company without money looks like this: Entrepreneur has an idea and bets his or her lifesavings on it. They invest every dime of their worth, move back in with their parents to cut down on costs, and work 18 hours days playing every role they can to eliminate company overhead. To put it simply: it’s nuts.
So why did I build my company without money? Well to begin with I was 21 and had no understanding of how much venture and angel funding was available. The thought of someone giving me a million dollars for my idea was preposterous. But the real reason was I wanted to own 100% of my business, I wanted to control it’s fate. This isn’t as easy as it sounds. The exchange was much slower growth, much less up front expertise and hundreds of more working hours for yours truly.
Looking back I have regrets. In just two years we have grown into a real business. But only now do I have the money to hire the expertise required to reveal all the mistakes that I made since the beginning. This is a very expensive learning experience – penalties, fees, legal and accounting expenses are the ghosts that haunt a recently “profitable” business. If only I had an extra $100,000 at the start I could have hired the experts, I could have avoided costly mistakes…
Would I have done it different? Would I try to raise money it I had my time over?
There is no doubt that the non-monied entrepreneur has it harder. But the non-monied entrepreneur also has the one thing that I prize more than anything – freedom.