To be a successful start-up, you don’t need a boat load of Venture Capital. Solve a real problem customers face and you can charge real money for it. One of the best sources of capital is sales, and this way you learn what your consumers like before making huge investments and squandering your VC. Now after you’ve done some hard work turning $1 into $10, you know how to turn $100,000 into $1 billion.
Here are a few examples of start-ups that have flourished with little to no money in the beginning but have grown into HUGE companies.
MailChimp: Back in 2000, Ben Chestnut was running a design consolation firm. Many clients would come to him wanting a newsletter created but Ben hated creating them so built a tool to save him time. This simple tool to automate a job he hated grew into a $400 million business.
An easy way to create an extremely useful product (and ensure demand) is to automate a part of your job you don’t enjoy because guaranteed there are people out there who hate the same job you do.
Shopify: The founders of Shopify wanted a shopping cart solution for an e-commerce site for snowboarders but couldn’t find what they were looking for so decided to create they’re own instead. This turned out to be something many others were looking for and the company ran independently for six years just on revenue. They eventually raised VC money and went public, now they stand as a billion dollar company.
Shutter Stock: Founder Jon Oringer was a software developer and armature photographer who combined his passions using development skills and 30,000 of his own photos to create a stock photo service. That service has grown to be valued at over $2 billion. This self-reliance made him one of a select few truly self-made billionaires. Focus on what you can do today to grow your idea.
Tough Mudder: Will Dean, founder of Tough Mudder turned $7,000 of savings into a company with over $100 million in annual revenue. The secret was presale registration to races and then using that money as working capital to construct the events that grew Tough Mudder into the spectacle it is today. Funding doesn’t need to come in millions of dollars at a time. Extremely savvy entrepreneurs design the product so they can take pre-sales and registration before deliver (or even production) of the product. This transforms customers into a new source of growth capital.
Loot Crate: This company had over 600,000 customers and $100 million in revenue before they even looked to VC for funding. The reason they were so efficient was that when they launched they had no idea of the actual products included in they’re subscription box. They setup a website and took pre orders, then using that money to buy the products to fill the orders.
Mojang: You may not have heard of the company but the product has become a phenomenon in every part of the world, Minecraft. The company had a tiny staff of 50 people and earned almost a billion dollars before being sold to Microsoft for $2.5 billion. Mojang never stooped to the lows of other viral gaming trends and so avoided pesky micro transactions and instead went with a flat fee to access the ever-evolving game.
Bottom line: VC isn’t the be all and end all.
Figure out what you need to and then look for investment. Don’t use VC to work out the kinks, this could lead to huge failure down the track when you run into a big issue and have already used up your capital. These companies didn’t seek VC or Angel Investors for a time and so when it came time to look for investment, they had the pick of the litter instead of coming off desperate.
But there’s no need to bootstrap forever. VC can really boost what you’re doing into the stratosphere but that’s what it should be, a boost. You build the rocket and when you need it, that booster of VC will be all you need.