It’s no secret that startups are, well, hard to start. On top of endless variables and constant problems, when you’re starting from the ground up there is absolutely no margin for error. As a founder, it’s your job to learn as you go, adapt, and make sure you’re making the right decisions for your startup.
Startups Can’t Afford Early Mistakes
At an established company with a few million dollars in capital to work with, wasting $10,000 on a Facebook ad campaign that doesn’t take off isn’t that big of a deal in the long run. However, at a startup, you have no such luxury. In the early stages, spending as little as $100 on a bad marketing idea could mean not being able to eat for a week.
Successfully navigating the early stages of a startup is largely based on your ability to navigate risks and minimize potential consequences. For many early stage founders, this means getting help from a variety of sources including friends, investors, incubators, and accelerators.
Take Risks and Minimize Consequences
Taking outside capital gives you the freedom of being able to take risks without worrying about where your next tank of gas will come from. It’s counterintuitive, but startups actually require risk to grow. Whether you are starting user testing or finding ways to reach new audiences, everything in the day to day operation of a startup requires the allocation of time, resources, or even both. In short, taking outside capital and assistance gives you more resources to allocate and minimizes the chances of capsizing your business.
It’s official: startups are in. As the idea of running your own business becomes increasingly accessible (and cool), the number of startups being founded each year is starting to increase. There’s no shortage of great ideas, but for founders, the increase in startups has made it more difficult to find early stage funding. As the landscape shifts to accommodate this, investors and strategists are finding new ways to get involved in the early stage startup community.
Start By Seeking the Right Help
Deciding to seek help from an investor or apply to a startup incubator is also a risk in itself. Finding the right way to fund your business is paramount when trying to generate sustainable growth. It doesn’t matter how much capital you have if your investors aren’t guiding you on the right path.
Every startup has different strengths and weaknesses. The first step to finding the best early stage help for your business is to pinpoint your needs and priorities.
- Why do you need capital?
- What are your weaknesses?
- Do you work well with others?
- Do you have any prior experience?
- How involved do you want stakeholders to be?
- How much hands-on help do you actually need?
Incubators, Accelerators, and Investors
Incubators: The primary role of an incubator is to get startups the resources they need to move forward. For founders with the least direction or startup experience, incubators can be the perfect tool to get on track. Most business incubators provide a range of services from marketing advice and presentation skill development to angel investor access and professional legal counsel. Most incubator programs have many startups enrolled simultaneously, and founders can benefit from networking opportunities and potential strategic partnerships.
The downside to incubators is the lack of a personalized experience. While the amount of equity and involvement varies depending on where you go, most incubators simply don’t offer much capital and can’t dedicate their focus to one particular startup.
Accelerators: Accelerators are similar to incubators but typically offer slightly more capital, are slightly more involved, and operate under a strict (and typically short) time constraint. Like incubators, accelerators typically have more than one startup going through at a time and offer unique networking opportunities for founders that work well with others.
Overall, startup accelerators and incubators serve as a great stepping stone to bigger players in the game. For those that can’t attract the immediate attention of investors, turning to an early stage accelerator can be just what you need to validate your idea and add the credibility that bigger angels and VC firms are looking for. Incubators and accelerators offer a wide range of support, and it’s hard to say anything bad about the experience one gets when working side-by-side with other like-minded startups.
Investors: As the value of early stage growth becomes increasingly apparent, investors have started to shift their strategies when it comes to investing in breakout startups. The investing and venture capital industry as a whole is rapidly trying to accommodate the changing startup landscape. Looking towards incubators and accelerators as inspiration, investors are starting to take early stage startups a lot more seriously.
Early stage angel investors and VCs adapt to accommodate the startup they’re currently working with. Investors provide the most individualized experience and typically dole out the most capital. Depending on who you work with, most firms or individuals will only be as involved as you want them to be.
Figuring Out the ‘Why’ Makes Finding the Right Method Easy
Whether you need more capital to make acquisitions and protect against current competitors or you need resources and marketing experts to launch your product and scale it fast, investors are great for startups that know exactly what they need. Angel investors and VC firms alike offer the most tailored experience for startups when it comes to early stage growth.
There’s no formula to successfully navigate the early stages of a startup. If you want to stay alive, you have to find the path that works best for you. Capital only matters as much as what you do with it. Having endless capital without the knowledge to execute a meaningful plan doesn’t result in sustainable growth.
Remember, behind every check is a person. No amount of capital can help you if you hate the people you’re working with. Instead of identifying what your startup needs help with and stopping there, continue on to identify why you need that help in the first place. Identifying why you need help makes it easier to find people you work well with. Focus on the people you’re going to be working with and it’s impossible to go wrong in choosing the best early funding channel for your startup.