Finance

The Venture Capital Financing Stages

Cash floats: The Savvy Entrepreneur's Secret to Starting Up Fast

Nobody ever talks about cash floats as a financing strategy for startups when investors are dragging their heels. They just aren't considered sexy enough by rookie entrepreneurs.  Rookies want to write a business plan and have someone drop $500,000 or $5 million into their checking account as a result.

When the financing campaign bogs down after the first few months--as it surely will, if it hasn't already --and your enthusiasm for the venture starts to wane, clueless people will try to be helpful by telling you that you just need to polish up your business plan, Powerpoint presentation, and  "elevator pitch" a bit more.  Then the money will come and you will finally be able to start.

With that type of advice it's no wonder so few startups get anywhere.

I'll let you in on a "secret." (Yes, I know that's an over-used word but it's the right word here as this is indeed a secret.) If you really start to pay attention to the startups around you, you will begin to notice that they can, for the most part, be broken down into two groups.

One group, the bigger one, relies on the "let's write a business plan and get funding" startup strategy.  Very few of the startups in this group make much headway. In most cases, if you check with them every three months, you'll hear nothing but scorn about investors who are too stupid to recognize what a gold mine their opportunity is.

The other, smaller, group consists of entrepreneurs who announce their intentions to launch a company and are in business within a month without ever having raised a dime from outside investors.

This is the group to study if you want to succeed as an entrepreneur.  Is there a common theme in their startup financing strategy you can learn and benefit from? The answer is a resounding "yes". It's the use of cash floats to get the company up and running and achieve traction. Smart entrepreneurs understand that they need to achieve some traction first before investors will take them seriously.  

If you want a quick intro to cash floats as startup financing strategy click here. The AVC Smart Startup Guide teaches you the intricate details of devising a cash float strategy to launch your venture.

If cash floats were good enough for Henry Ford, Bill Gates, Micheal Dell, and Jeff Bezos, and a host of other leading entrepreneurs, they are good enough for you.

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