Starting your own business is a dream for many, but too often solid business ideas never make it past the idea phase. Too often potential entrepreneurs are deterred from starting their own business because of the perceived start-up costs. Starting a business is expensive right? Not quite.
As an entrepreneur myself, people pitch me business ideas almost every day. But then when I offer to help, many potential entrepreneurs immediately hit the back button. Too often I hear “I don’t have the money to start Company XYZ”. This response is incredibly frustrating for me.
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When I started my first company in 2014, my co-founder and I were Sophomores at the University of Delaware. Between the two of us, we were able to scrape together $1,600 to fund our company, a far cry from the $50,000 awarded to Pied Piper on HBO’s Silicon Valley. And after a $100 filing fee for our LLC, we were left with $1,500. With our initial $1,500 in the bank, we hit the ground running, working to create our company which eventually turned into LendEDU.
How could you start a business with only $1,500?
You may have heard the recent saying that it is cheaper to start a business today than ever before. I couldn’t agree more. As more and more potential business ideas are based on the internet, the costs of starting a business continue to fall. Cheap computing power alongside advancements in technology have made getting your startup off the ground incredibly cheap. For only $20, you can get a domain name, a year’s worth of web hosting, a WordPress theme, and simple logo off Fiverr. Boom! That E-Commerce idea is now off the ground.
Now I want to share 3 startup tips we used at LendEDU to get our business off the ground.
1. Start with an MVP
As defined by Wikipedia, an MVP, or minimum viable product, is “that version of a new product which allows a team to collect the maximum amount of validated learning about customers with the least effort”. In my own words, an MVP is the simplest version of your “product” that will let you find out if you have a good idea or not.
Every Entrepreneurship 101 course has taught the MVP concept. Even if you’ve never taken an Entrepreneurship course (I’ve never taken an Entrepreneurship course), grabbing hold of this concept will be easy.
Start by using filling out a Business Model Canvas to clearly articulate your idea. From there, build an MVP which will allow you to test your “value propositions” in a real environment. I bet that 99% of the business ideas I hear could be built with an MVP for under $100. Find the key product functions needed to deliver your value proposition. Cut out the fat, and keep it simple stupid. Do you need a $500 customer support system on day 1? No, a simple contact form plugin can do.
Start your business with an MVP. Not only will it be incredibly cheaper, but the whole process will feel dramatically less overwhelming.
2. Leverage university resources
When we were getting our company off the ground, we were actively looking for ways to get our hands on additional capital. We weren’t entrepreneurship students, we hadn’t even taken an entrepreneurial class, but we knew our school had a sizable entrepreneurship program called the Horn Program. These days, many Colleges and Universities are investing in their entrepreneurship programs as a way to attract students and to promote learning outside of the classroom.
We were awarded over $5,000 as a grant, just to get our product built. Moreover, we were provided free office space, internet, coffee, and more! University and College entrepreneurship programs are great places to look for free funding. Even if you aren’t currently enrolled, you may have resources available to you. Many academic entrepreneurship programs offer benefits to alumni too!
If you are currently in school, or an alumni, pay a stop to the Entrepreneurship building and see what free resources are available. I bet the results will be surprising.
3. Apply to a startup accelerator
Startup accelerators are a hot topic these days. In short, startup accelerators are fixed-term, cohort-based programs, that include mentorship and educational components and culminate in a public pitch event or demo day. Seemingly every day, another startup accelerator is popping up and looking for new companies to invest in. In our case, we were accepted into the Iowa Startup Accelerator with our MVP.
Startup accelerators are early stage investment funds. When I say early stage, I mean it. Some accelerators don’t even require an MVP. In general, startup accelerators are looking for driven people with unique stories. Startup accelerators usually provide about $20,000 for 6% of your company. Instantly your idea could turn into a company worth $333,333 on paper. F6S is a great place to start looking for accelerator programs. We found our accelerator through F6S!
Startup accelerators are usually focused on one or two particular industries (fintech, education, agriculture, etc.). Spend some time looking for the right match before applying to every single XYZ Startup Accelerator. At the end of accelerator programs, you are usually showcased in front of many seed investors in an event called Demo Day. Accelerators are great tools to find follow-on funding as your MVP begins to grow. In our case, LendEDU found its follow-on funding as a direct result of our accelerator.
Starting a business is a challenging and rewarding career path. You should know that taking your idea and creating a business is a lot cheaper than you would expect. Don’t let fears of high upfront costs sink your idea. Don’t let “I don’t have the money to start Company XYZ” be an excuse. While I focused on technology startups in this article, the principles are the same as if you were starting a bicycle repair shop. Start with an MVP, look for free resources, and consider going to a startup accelerator.
Lastly, make sure that you budget in beer. The ups and downs can be tough to swallow, but sooner or later you will become immune to psychological swings. I promise.
Nate Matherson is the Co-Founder of LendEDU. LendEDU is a marketplace for student loans and student loan refinance. LendEDU allows student loan borrowers to get quotes from all the top student loan lenders with one application.