Living and Giving

Inputs, Outputs and Diversification

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I was recently asked about funding for entrepreneurs as they get started launching their venture.  I thought it would be valuable to share my resulting thoughts here as well.

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Inputs, Outputs and Diversification

We often think of funding as amassing a lot of funds so we can get started. But what if it\’s about using those funds effectively? Part of fundraising is about inputs and outputs. 

Think about the energy it takes to fundraise. Cultivating relationships, and long-term committed funders, takes effort.  So when you do raise funds, you want to make those funds really work for you. 

I\’d recommend not ever leaving the mindset of bootstrapping.  If you focus on using those initial funds scrupulously, then you can spend less time fundraising.

My second main point is diversification.  Just as you would diversify your own personal portfolio with savings, checking, CD and stocks, so should you with your business.  That initial funding includes your own savings, the utilization of interns, probono services such as accounting or law firms, individual investors, institutional investors, corporate investors…

By having a strong mix, you protect your initial and long-term growth.  As one type of funder increases or decreases their involvement, you are able to rely on other sources.  Then marry that with scrupulous use of your funds, and you can maintain yourself successfully and consistently over the longhaul.

Part of the most exciting element of funding is not just \’closing\’ a win in funding. It\’s about managing it correctly and making it last. It\’s about the ethics of valuing the money you are given, as if it were your own (and often it is).  You can provide that same level of respect you\’d give your own funds to those of an investor.