BOOTSTRAPPING or HOW MUCH CASH DO YOU REALLY NEED?

Here's the scenario I encounter almost daily: Entrepreneur has great idea in great market and wants a half a million dollars to get started. And that half million is earmarked for founder salaries, administrative costs, office space, new equipment and so on. And they're quick to point out that this "investment" will pay off for the investor because the idea is just so right.

Problem is that experienced investors invest in proven entrepreneurs - ideas are a dime a dozen. And I'm not talking about an investor with a track record of one or several successful businesses. What the investor is looking for is an entrepreneur that can get things off the ground without investment. A crafty individual that can leverage assets, utilize collaborators, and put some personal risk into the game. Someone who can move the needle forward just enough to validate the business model and more importantly, his or her abilities. Someone who needs some cash to take the proven model to the next level.

So, if you're just starting out, consider these two steps:

1. You don't need as much cash as you think. I wish I had a great class A space office to work out of the luxury of a salary to allow me to focus on building my business. But in reality, no one, outside a wealthy relative, is going to fund this. And this is a good thing. This forces you to work hard and act fast. And every good entrepreneur needs to do both, because your competition definitely is. And choosing to spend cash on new equipment and expensive office space is a clear signal to an investor that you're really great at wasting cash.

2. You are going to need cash, a whole lot of the stuff down the line for growth. Good business strategy plans for this with projections. And an investor is looking to invest in this growth and the entrepreneur that has realistically planned for this on top of the startup bootstrapping.

Summing up, investors invest in great people who can bootstrap a great idea and anticipate long-term costs. Be that entrepreneur. Getting from here to there is business strategy. It may seem academic, but nothing is more critical to an investor. When he or she asks the tough questions, have the right answers.