There are numerous ways to get your company off the ground, from bootstrapping and raising a traditional seed round to crowdfunding your debut product on services like Kickstarter.
Each option comes with its own unique upsides and downsides, and so to bring clarity to the subject, we sat down with the founders of Turf Geography Club, Coupons at Checkout, and Hide&Seek.
Angel Investment
Looking back on Turf, which came to an end in February 2013, founder Michael Tseng says: “Turf came about at an incredibly interesting time. I didn’t have a network of people to rely on for the resources I needed, and so I started a Kickstarter campaign with the intent to take Turf as far as possible on my own.
Within the first 24 hours of launching, Turf raised $2,000. Then I got a call from an angel investor who said, “I want to fund this. Let’s meet.” From there, more doors started opening. Various investors, including David Tisch, jumped on board. Kickstarter helped raised $18,000. The seed round raised $615,000.
The ultimate goal of investors is to make money. They put in a lot and want something in return. When you’re not successful right away, they give you some pressure. That’s why we released the Turf app early, something we may not have had to do if we just bootstrapped. But a good seed investment is not just about the cash. If you need advice or help with getting in touch with someone, you know you can call on your investors. They provide invaluable resources you can’t really get anywhere else.”
Editor’s note: Check out Tseng‘s latest company, Swift.
Bootstrapping
With bootstrapping, Coupons at Checkout founder Marc Mezzacca says: “there’s not as much risk and pressure. It’s just you and your savings. When I started working on coupons full-time in 2012, I wasn’t sure I wanted to rely on someone else for funding — depending on how much you’re taking, you have to report to people and meet certain goals.
Starting out, my dad gave me $2,000. And my background was in programming so I was able to make a good living. Once Coupons started growing more rapidly, we had enough cash to continue funding it ourselves.
I learned that your business model needs to be cash positive very early on. Have a revenue system actually built into your business model to bring in revenue beyond what you’re putting out. We generate revenue through coupon redemptions.
The toughest part of bootstrapping is that you have to believe you can grow within the market. If the market is growing or changing very rapidly, then you should probably seek outside funding because you’ll run too slow on your own and not grow fast enough.”
Crowdfunding
Margaret Robertson, president of Hide&Seek NY, says Kickstarter reaped numerous benefits: “We had gotten warm responses from people who encountered our games on the sidewalks of London. Before putting energy into making the Tiny Games app, we wanted to find a bigger audience and make sure they liked it too.
Our Kickstarter campaign got a great response. In addition to covering the production costs of making an app, there were additional benefits we didn’t see coming. First, Kickstarter provided effective market research and publicity for us. We developed an audience that cares about our product, who can get others around them to be excited about it too.
We also got a big boost on the recruitment front — people got in touch with us on Kickstarter saying they wanted to work with us. And we were able to build our partnerships, including our collaboration with Sesame Street.
One thing to definitely consider is the geographical location for your campaign. We kickstarted ours in Britain, so it can be a bit unnerving for American backers when the prices they encounter are in UK pounds and not dollars. At the end of the campaign, we realized how much energy we put behind it. You have to work hard at running a good Kickstarter. It can be a bit arduous, but in the end, it brought in a whole suite of benefits for us.