Startup Capital is the End, not the Means, to a Successful Startup Business

Several clients and consultants advocate startup capital as entrepreneurs’ greatest need.  Our take on this assessment is they have put the cart before the horse.

Startupconnection argues entrepreneurs need to develop a basic business plan before they worry about raising money.  Any source of startup capital will be reluctant to provide access unless one can initially address a number of key questions:

• How much does the venture/business need?
• How and when will funds be paid back?
• Why should anyone have faith to invest money in the venture?
• What is the expected risk and return?
• What are the resources the venture/entrepreneur has or plans to have to   support the request?

I recently read Left Brain Right Stuff by Phil Rosenzweig.  The book supports our view. Rosenzweig argues business startups and decision making face a natural dilemma between confidence and over confidence.  We are all aware of the need for confidence and energy in making business decisions.  These can easily be derailed, however, by over confidence based on insufficient knowledge or by just basing decisions on biased judgments.  We also learned there are some simple tools to reduce overconfidence, develop startup business plans and eventually raise startup capital.  Tools could include:

• Developing business proposal templates to understand parameters of a business. These can be used to develop financial projections and assess alternatives.
• Using a tool such as SWOT Analysis can force an evaluation of opportunities and challenges.
• Relying on expertise and experience.  This could include outside experts who can greatly enhance the potential for success in areas where entrepreneurs are lacking.  Particularly true in accounting and internet marketing.
• Developing, testing and adapting ideas to develop small profitable examples.  This speeds up the startup process and make an entity more eligible for startup capital

The above suggestions along with others are not intended to negate the energy, right brain thinking, and creativity necessary for success. Rather, they will help entrepreneurs develop and execute more effective strategies in less time.

Bert Shlensky is president of www.startupconnection.net.  Realistic planning, testing, adaptation, and execution are key to business startup success.