Dan Martell - How To Fund Your Startup

00:00:00.160 It's fascinating to me that all the successful entrepreneurs

00:00:03.500 I know, they look at being resourceful.

00:00:05.720 They don't look at somebody else needs to pay for this thing.

00:00:15.980 How to fund your startup.

00:00:18.500 In this video, I'm going to help you overcome the challenges.

00:00:21.240 Maybe you have an idea and you're wondering like,

00:00:23.360 where does the money come to get this thing started?

00:00:25.800 Or you don't feel like you know the right people

00:00:29.100 in your life to actually help support you

00:00:31.600 and maybe lend you some money to build the first prototype.

00:00:34.680 Those are real challenges, but here's what I know,

00:00:37.440 is I know that some of the best entrepreneurs

00:00:39.880 that I've ever met never looked at capital

00:00:43.780 as the primary challenge.

00:00:45.180 They always looked at being resourceful,

00:00:46.960 and I wanna unlock that and show you

00:00:49.620 literally eight different ways to fund your startup.

00:00:54.260 Okay, it's super powerful.

00:00:55.660 Now, I've been fortunate enough that, you know,

00:00:57.500 I've done pretty much every one of these,

00:00:59.500 I've gone through some incarnation.

00:01:01.000 I started building companies when I was 17, failed.

00:01:04.300 Did it again when I was 19, failed.

00:01:06.600 Tried again finally after consulting and licking my wounds

00:01:10.100 and building my confidence back up.

00:01:11.600 And at 24 I started a company called Spheric Technologies

00:01:13.800 with the money I saved.

00:01:15.100 But then I've also gone in and invested

00:01:17.100 in a ton of other companies with my own money.

00:01:19.300 Companies like Intercom that's gone on to raise

00:01:21.600 tens of millions of dollars in funding, Udemy,

00:01:25.100 supporting my brother and his company,

00:01:26.900 supporting my friends locally, like,

00:01:29.660 what I've learned is there are different ways

00:01:32.600 to get your dreams, your product, your software funded,

00:01:36.120 and that's what I wanna share with you guys today.

00:01:38.140 The first one for me is bank or credit cards.

00:01:40.880 I think that many people start off and they think,

00:01:44.080 well, I need to get an investor to get involved

00:01:45.880 in my business to start, and that couldn't be further

00:01:48.120 from the truth.

00:01:48.960 At the end of the day, if you are a credible person

00:01:52.740 and you haven't made horrible life decisions

00:01:55.000 that have just like cratered your credit score

00:01:57.440 or relationship with your banker,

00:01:59.800 then you should be able to go to the bank

00:02:02.380 and borrow some money.

00:02:03.600 I mean, ideally you'd have a credit card.

00:02:05.380 I mean, some of the best companies, Airbnb.

00:02:07.420 Joe and Brian talked about it.

00:02:08.520 We like applied for all these different credit cards

00:02:10.880 at the exact same time and used that funding

00:02:12.960 to start Airbnb.

00:02:14.420 I started pretty much with my credit card

00:02:17.660 because I mean, if any expenses like servers or whatever,

00:02:20.520 that was the way I started.

00:02:21.400 When I started NB Host, we needed to buy software

00:02:23.820 and infrastructure and we had lines of credit.

00:02:26.520 And I mean that was, you know, personal lines of credit,

00:02:28.860 loaned to the business, bought all the infrastructure.

00:02:31.160 So I just think business bank loans and credit cards

00:02:35.240 do have this place, especially credit cards.

00:02:36.960 I just, I love meeting founders that hustled so hard

00:02:39.760 to just make it work.

00:02:40.900 The second thing is to trade equity.

00:02:44.000 And that's both equity in the business,

00:02:46.700 so the value of the business or a piece of the business,

00:02:49.120 and sweat equity, your time.

00:02:51.420 So this is nights and weekends and just making it work.

00:02:53.680 I mean, a lot of you guys have jobs

00:02:55.680 and I think people think they need to quit their job

00:02:58.780 to start the business and that's just not the case.

00:03:01.220 What I always say is try to get this new business

00:03:03.520 to at least 60 to 70% of your current income

00:03:07.800 and then make the swap.

00:03:09.560 I mean, my favorite story to share is Plenty of Fish.

00:03:11.760 The guy, you know, plentyoffish.com got bought

00:03:14.240 for 550 million within I think a nine to 10 year period

00:03:18.140 and he started off by running home every day at 4 p.m.

00:03:21.940 and coding till 11 p.m. and getting up early at 5 a.m.

00:03:25.440 and coding before he went to work at 9 and going to work

00:03:27.740 and working over lunch and that to me is a beautiful thing.

00:03:31.940 So trade equity, either hire services or professionals

00:03:35.140 and get equity to get them involved in your business

00:03:37.640 to help fund things.

00:03:38.840 The third one is startup accelerators.

00:03:41.440 In most cities in North America or whatever part of the world

00:03:44.540 you're watching this video at,

00:03:45.440 you probably have a startup accelerator

00:03:48.140 that's willing to give you 25, 50K.

00:03:50.440 some give 250K, to seed and incubate your idea

00:03:55.920 and you just need to go through the application process

00:03:58.140 and it's crazy, like why Commodore and Techstars

00:04:00.180 is harder to get into than Harvard,

00:04:02.480 but those are legit options for the local accelerators.

00:04:06.620 Many of them have a lack of entrepreneurs

00:04:09.160 coming to them with viable ideas.

00:04:11.360 Like they don't have enough applicants

00:04:13.720 that are serious and motivated

00:04:15.500 and have something worth building.

00:04:17.140 So your idea presented in a super compelling way and with a

00:04:21.420 lot of passion and commitment is probably gonna get you in

00:04:24.920 there and get some of that funding.

00:04:26.340 The fourth area is VCs and professional investors.

00:04:28.980 So VCs stands for venture capitalists.

00:04:31.020 These are people that manage funds so they actually go out

00:04:34.120 and raise their own money which is kind of neat when you

00:04:35.660 understand that so you're raising money from them.

00:04:37.520 They actually had to do the exact same exercise and raise

00:04:39.700 from what's called limited partners and now the VCs have

00:04:42.640 to make decisions on who they give money to because they need

00:04:45.640 to generate a return over a 10 year period.

00:04:48.780 I say that is because there are thousands

00:04:50.940 of venture capitalists in the world

00:04:53.020 and they're looking for the entrepreneurs.

00:04:55.780 And just so you know, they don't have a job

00:04:58.460 unless people like you go out there and create the future.

00:05:02.520 And I think that's an exciting place to come from

00:05:04.800 and a kind of a reframe from what many entrepreneurs

00:05:08.260 starting off get into which is I need their money

00:05:10.900 to be successful.

00:05:11.840 At the end of the day they need you

00:05:13.600 to actually be successful in their fund.

00:05:15.800 So VCs is a great source.

00:05:18.440 Another one would be local angels

00:05:20.900 and kind of high net worth people.

00:05:22.440 So in your community, you have angel groups.

00:05:25.720 These are people that own real estate,

00:05:28.220 they own the car dealerships,

00:05:29.380 they may own really profitable high revenue businesses

00:05:34.020 and they want to diversify a bit

00:05:35.580 and get involved with young and eager and fun companies

00:05:39.000 so they're part of these angel groups

00:05:41.060 and you can actually, maybe on a quarterly basis,

00:05:43.600 they have a meeting where you can come in

00:05:45.300 and pitch and raise money that way.

00:05:47.200 So that is a super valuable and typically open up

00:05:51.800 to everybody, even in towns of 100,000 people,

00:05:54.820 they have an angel group in your state or province.

00:05:58.380 Six would be crowdfunding.

00:06:00.480 You know, one of my buddies, Clay Hebert,

00:06:02.420 one of the foremost top experts on crowdfunding,

00:06:05.060 he said it best, is he said that the cost of failure

00:06:08.620 is gonna go to zero because crowdfunding

00:06:11.600 has leveled the playing field

00:06:13.060 for market validation before you build anything.

00:06:15.380 So not only is crowdfunding an incredible source

00:06:17.940 of capital to, or money to start the company,

00:06:21.720 it's also a beautiful way of testing if there's a need,

00:06:25.220 if there's people out there that actually wanna buy

00:06:27.680 what you're gonna build or sell,

00:06:29.500 and you can do that on Indiegogo,

00:06:31.940 or Kickstarter really doesn't like software projects,

00:06:34.740 GoFundMe, there's a ton of different crowdfunding platforms,

00:06:37.400 but at the end of the day, just so you know,

00:06:39.420 it's 20% video and the page itself

00:06:42.680 in the story you write about your project,

00:06:44.580 your software project, and really 80%

00:06:46.720 about marketing and distribution.

00:06:48.480 They're not gonna get you the project funded.

00:06:51.220 You're gonna have to do some work, email some bloggers,

00:06:53.360 email the press, really drum up a lot of interest

00:06:56.100 in that crowdfunding campaign.

00:06:58.160 So super powerful, but there's work involved,

00:07:01.000 so don't be misled and think that it's gonna be easy peasy,

00:07:04.160 because it's not.

00:07:05.000 The seventh is friends and family.

00:07:07.100 Sometimes they call it fools,

00:07:08.140 and I just find that super insulting.

00:07:09.740 So friends and family.

00:07:11.140 These are people that know you best,

00:07:14.080 that believe in your vision, and are willing to back you.

00:07:17.540 I remember when I started my company Flowtown

00:07:19.480 with my co-founder Ethan, it was early days,

00:07:22.060 and I had sold my previous company Spheric,

00:07:23.960 so financially I was in a good spot,

00:07:25.820 and I could have funded the whole company,

00:07:27.320 but one thing that I felt, and really this was just

00:07:30.320 as a way for us to set the foundation as strong as possible,

00:07:34.020 I said to him, look, I'll fund 70% of this,

00:07:37.260 but I need you to go and raise the balance 30%

00:07:40.400 from your friends and your family members,

00:07:42.600 and whoever, literally just like go find somebody

00:07:44.580 that's gonna lend you the money and meet me halfway.

00:07:46.940 And this was a huge reason,

00:07:48.980 and like I always knew Ethan was incredible,

00:07:51.240 but I remember this was like a conversation on a Friday,

00:07:53.880 and on Monday he called me and he says,

00:07:55.280 I got the money.

00:07:56.620 And I was like, alright dude, did you do anything illegal?

00:07:59.420 And he's like, no.

00:08:00.660 I'm like, where did you find that money?

00:08:02.780 Because we're talking tens of thousands of dollars.

00:08:05.060 And he said, my mom gave me some money,

00:08:07.020 my dad gave me some money,

00:08:08.120 and a couple best friends from college gave me some money.

00:08:10.420 And for me, as a partner, that just said so much about Ethan.

00:08:15.220 Even though we had just kinda got to know each other

00:08:17.200 over the previous year, here are people

00:08:19.300 that have known him his whole life

00:08:21.140 and were willing to part way with arguably

00:08:23.740 one of the most valuable assets in somebody's life.

00:08:26.500 They were willing to invest in him.

00:08:28.980 And really, before there was any product

00:08:31.040 or proof that this was gonna work.

00:08:33.020 And I just thought that said so much.

00:08:35.440 So friends and family, I think, is an incredible,

00:08:38.380 just be honest with them, just tell them, it's high risk,

00:08:40.580 and I'm gonna make the best decision I can

00:08:42.480 with the information I have, but don't give me money

00:08:45.320 you wouldn't be comfortable losing 100%.

00:08:47.760 I just think that that's where things get a little dicey

00:08:50.020 when people misalign expectations.

00:08:52.320 And number eight, the most important,

00:08:54.900 and I'm gonna share a really quick tip for you

00:08:56.660 right after this, eight is to fund yourself.

00:08:59.600 I think so many people have jobs and they go,

00:09:03.740 I'm gonna quit my job and pursue this idea

00:09:06.380 once I raise money.

00:09:07.880 And when I hear that, just so you know,

00:09:09.380 what I'm thinking is you don't even trust yourself

00:09:12.680 or willing to bet on yourself

00:09:14.520 and you expect me to fund that risk.

00:09:16.980 And that to me is just crazy.

00:09:18.480 If you're not willing to put all in,

00:09:21.720 slide all the chips, that's what this motion is,

00:09:25.320 go all in on your idea but yet you expect everybody else to,

00:09:29.660 I think that's just a negative signal

00:09:31.700 and just a really weird place

00:09:33.100 to start a relationship with investors.

00:09:34.640 So, funding yourself, digging into your own savings.

00:09:38.280 I mean, Maritime Vacation was friends and family.

00:09:40.580 My dad essentially helped fund that business

00:09:43.280 and I, to this day, continue to tell that story

00:09:46.220 because it was super incredible for him

00:09:48.120 to believe in me at 17 years old.

00:09:49.860 NB Host was my line of credit with my brother

00:09:52.680 and his line of credit to fund all the servers.

00:09:55.520 Spheric Technologies was working and funding myself

00:09:58.720 and saving up $70,000 to eventually start that company.

00:10:02.320 Flowtown was, again, me putting my own money in,

00:10:04.880 Ethan putting some of his in,

00:10:06.400 and eventually we raised venture capital

00:10:07.920 from professional investors, you know,

00:10:09.700 guys like Steve Anderson from Baseline Ventures,

00:10:13.060 First Investors in Instagram and Twitter,

00:10:14.900 and just like, and then Clarity again.

00:10:17.000 Mark Cuban invested in that, but I put in, you know,

00:10:19.080 almost half a million dollars of my own money

00:10:21.000 to get that company started,

00:10:22.580 and then we eventually raised 1.6 million,

00:10:24.580 but it's kind of like all eight of these put together.

00:10:28.140 Now, I never did an accelerator.

00:10:29.820 I have a great video on how to start your own accelerator

00:10:32.780 if you want to search that out.

00:10:33.780 I think it's a great way if you don't get in.

00:10:36.220 It doesn't mean you should stop doing the things

00:10:38.420 you would have got as value from those accelerators.

00:10:40.900 But those eight tips, right?

00:10:43.700 You know, the going to the bank, using lines of credit.

00:10:47.060 You know, trading equity to help bring in resources

00:10:50.160 and or sweat equity to build the business.

00:10:52.520 To use startup accelerators as a way to fund, validate,

00:10:55.820 and help you grow the business.

00:10:56.980 to reach out to VCs and professional investors

00:11:00.620 is super smart.

00:11:02.660 Going to the local angel groups

00:11:04.120 or finding those high net worth individuals,

00:11:06.180 they're there, they're in your city,

00:11:07.360 they've got millions of dollars,

00:11:08.720 hundreds of millions in some cases,

00:11:10.300 and to throw a check your way for 50K is not crazy.

00:11:13.700 Crowdfunding, cost of failure goes to zero.

00:11:17.460 Friends and family is a beautiful thing

00:11:19.100 because it says so much about trust.

00:11:20.940 And then finally, invest in yourself.

00:11:24.040 That is my mission.

00:11:24.940 Now the tip is, is the mindset.

00:11:26.540 Here's the way I think about it.

00:11:28.100 Don't raise more money than you're willing to lose

00:11:30.420 and if you lose it, you chalk it up as learning, okay?

00:11:33.220 So that's the way I think about it,

00:11:34.480 is you're investing in yourself, in your business,

00:11:37.920 not so much for the financial outcome,

00:11:40.220 but your opportunity to learn.

00:11:41.980 So in some ways, it becomes education

00:11:45.860 and that's the way I think about it

00:11:47.000 so I don't get too hard on myself

00:11:48.300 if I put 20K into a small little project and it fails.

00:11:51.200 I just chalk it up as learning.

00:11:52.240 Now, the best ultimate financing ever,

00:11:56.580 the world's best, kinda like crowdfunding,

00:11:58.920 I just call it customer financing.

00:12:00.480 Finding customers to pre-buy the product

00:12:03.460 that you wanna build as an early adopter,

00:12:05.820 it's a whole framework I've created

00:12:07.760 called the customer creation model,

00:12:09.260 but it is the best form of financing.

00:12:12.860 As per usual, I hope this video finds you incredibly well.

00:12:15.320 I wanna challenge you to live a bigger life

00:12:17.260 and a bigger business, and I'll see you next Monday.

00:12:19.600 If you like this video, be sure to subscribe

00:12:21.140 my channel for other videos on how to start and grow your

00:12:24.120 startup.

00:12:24.780 I'd also encourage you to join my newsletter for invites to

00:12:27.820 private events, exclusive contests and other free training

00:12:30.580 materials if you're ready to get going.

00:12:31.680 I got two other videos queued up for you right now.

00:12:34.080 I'll see you next Monday.

Dan Martell - December 18, 2017

How To Fund Your Startup ｜ Funding A Startup

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