The Art of the WordPress Startup: Part 8

Starting Broke

This post is part 8 of a series on how to launch your startup on WordPress. Last time I talked about founder retirement, including why it’s important and why founders are often the worst at planning for it. Today’s post will apply to some of you but not all of you. How to start a company on WordPress if you’re broke.

Hopeless

If you’re starting out with no cash to invest in your company, like savings = 0, it can seem hopeless. You might think “there’s no way i can start a business, i have no money, i heard it takes money to make money” and although making money is easier when you have money, it doesn’t mean it’s the only way. You definitely have it harder than someone with cash, but it doesn’t mean you can’t create a valuable company. You’ll just need to be more creative and it might take longer, but that’s reality.

Raising Traditional Capital

At this point many people ask… “shouldn’t i just raise money from an angel or VC?” and if you’re not well connected to the local financing community and don’t have traction (e.g. revenue or explosive user counts) then you should probably focus on getting some momentum before going that route. Why? Because the best way to get in touch with a real angel or VC is to be referred to them, rather than cold calling or emailing them direct. But why is that the best route? Because they get so many pitches that it helps cut you through the clutter. VC or angel says “Sam referred this lead to me, it must be at least worth hearing their pitch” and so on. So that leaves two main sources of raising capital, which are friends and family. I personally find it awkward to pitch friends/family, but some people don’t and if your friends/family happen to be rich, even better. Don’t take your grandma’s last nickel because if your startup fails, you’ll be more upset than she is.

If you’re like me and not comfortable with pitching your friends/family, then here are some other ways to get capital together…

Sell Your Time

Ever wonder why so many first time founders start an agency or service business? Because it requires very little capital. Building a product-based business often requires far more capital. If you’re selling widgets via eCommerce on your WordPress site, then you’d need to pay for molds or 3D printed prototypes, do package design, and many other things in addition to creating your website. The costs can add up.

But a service business is among the cheapest to set up, and it can often give you the seed money to start the product-based business you dream of, whether it’s selling widgets or building a SaaS. What type of service business or agency should you start? Well, that depends on your skill set. If you’re a great writer, maybe you start an agency that writes blog posts for companies or a business plan writing service. If you’re creative, maybe it’s a design agency. If you don’t have any real marketable skills, then take the time to learn some via online classes or wherever because it’ll help you with your eventual product-based business anyways.

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Credit Cards

I am not advocating running up tons of credit card debt, but some companies have been financed this way and it ended up working out really well for the founders. If you are going to pursue this route, first get your credit in order with something like Credit Karma and that way if you take out any credit cards you’ll get better interest rates and limits on them. Ideally you want cards with 12 months 0% APR so you’re not getting hammered with interest for the entire first year. By the time month 12 rolls around, hopefully you’ve either paid them off or can at least make the monthly payments with ease via the newfound revenue/profits of your startup.

SBA Microloans

Full size SBA loans might be hard to get if you’re just starting out, so first focus your attention on their microloan program. It provides up to $50K in startup money with the average loan size being $13K as of the time of this writing. Having $13K might not seem like much but it’s a lot better than zero, and if you’re lucky you might end up with far more. You can use the proceeds for working capital, inventory, office furniture, or machinery/equipment.

P2P Financing

If you can’t get a microloan from the SBA, then see what kind of loans and rates you can get at places like Funding Circle, LendingClub, Prosper, and OnDeck. They each have different requirements in terms of credit score required, the amount you can get, and the purposes you can use it for, however they’re definitely worth checking out and the interest rates tend to be better than credit cards (unless you get a 12 months 0% APR intro offer like discussed above, in which case that might be a better option all else being equal).

Crowdfunding

You’ve probably read about the recent Jobs act and how it’s affecting crowdfunding. If not, you can read about it here. Anyways, there are a bunch of places you can check out to crowdfund your idea and they include Kickstarter, Indiegogo, Crowdfunder, GoFundMe, FundAnything, RocketHub, and Quirky. The latter of which is geared mostly toward those with product inventions, like creating a better umbrella or whatever.

Pull a Leno

I never really watched Jay Leno, except when I was visiting my parents, but he says he always worked two jobs so he could save up. Even while hosting The Tonight Show for 20+ years he did stand-up comedy shows and lived off that money, banking the money paid to him by NBC for whatever reason. If Jay can do it, you can too. If your current job isn’t providing enough to support your needs plus capital to save to launch your company, consider pulling a Leno. Get a second job, whether it’s nights or weekends, and save that money exclusively to launch your startup. If you’re planning on running a startup, it’ll be good practice for working round-the-clock like a founder.

Partner “Up”

If you have a great idea and bring value to the table, then consider partnering with someone who has a bit of spare change to co-found the company. Yes, they’ll get more equity because they’ll be making more of a “capital contribution”, but that’s life. You’d want more equity if you were the one putting up the cash, right? This is different than finding an angel because a co-founder will get a larger stake and be fully involved, so there is less risk for them in a sense and they have more control. It might be easier to find a rich partner than an angel to take a gamble on you. Plus, having a co-founder tends to look better when you do go to raise capital down the line from an angel or VC.

Key Takeaway

In conclusion, being broke isn’t an excuse for giving up, but rather an impetus for getting creative. Now start filling up those empty pockets.