As the founder of the Stovall Center for Entrepreneurship, where hundreds of college students come from around the world to earn their degrees and learn how to start their own businesses, I’m always amazed at the misconceptions about investors.
Many misguided would-be entrepreneurs feel that because they have an idea or an inspiration, someone should write them a huge check for a very small piece of their enterprise. In reality, venture capitalists, often referred to in the business as vulture capitalists, are rarely interested in risking any of their time or money on your or my ideas. This is not to say that investment bankers or venture capitalists won’t be a part of the expansion or later phases of your business. As a start-up company, you are likely to launch your business through a process known as bootstrapping.
The term “bootstrapping” originated from the old idea of pulling oneself up by one’s own boots, implying independence. While this technique may start out smaller and take longer, those who are successful will find they own 100% of their company and are not obligated to repay a bank a considerable amount of capital plus interest. Often, those who are bootstrapping employ a technique known as sweat equity. This approach involves doing everything possible yourself and building from the ground up.
There is an exciting, relatively new concept in gathering start-up capital known as crowd-sourced funding. People have successfully raised thousands to millions of dollars by turning their potential customers into equity investors that don’t have to be repaid or given a share of the enterprise.
I have successfully been involved in crowd-sourced funding to raise money for a movie. People who invested a few hundred dollars to a few thousand received autographed books, movie posters, and other promotional items associated with the film, as well as the opportunity to host their own movie premiere night. In this way, we raised the money to complete the movie while building excitement and loyalty with our biggest fans, who became our initial movie patrons.
Having lenders or equity investors is often a burden on your fledgling business, which can make it difficult or nearly impossible to succeed. It’s hard enough to climb to the top of the mountain without carrying bankers and investors on your back.
As you go through your day today, think creatively, and you may find you already have all that you need to get where you want to go.
About the author: Jim Stovall is the president of the Emmy-award winning Narrative Television Network as well as a published author of more than 50 books—eight of which have been turned into movies. He is also a highly sought-after platform speaker. He may be reached at 5840 South Memorial Drive, Suite 312, Tulsa, OK 74145-9082; by email at Jim@JimStovall.com.