Q How can we get our company funded

Guest post by: Seth Godin
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Caring - By Seth Godin

A: Don't.

I'm frequently asked (by friends, and sometimes, aggressive strangers) to help them find someone to fund their company. Often, but not always, these people are happy to hear the following answer.

1. If you fund your company, even a little, you've just sold it. Maybe not today, or tomorrow, but one day. That's because rational investors are funding your company in the expectation that you are going to sell it and make them a profit. (sure there are exceptions, but not many). So, if you don't expect that your company will be easy to sell for a big profit, or you don't ever want to sell your company, it's not a smart idea to raise money for it.

2. Most companies are not appropriate sites for VC money. That's because they're freelance ventures, not entrepreneurial ones. A freelance venture is one where you work to get paid. An entrepreneurial one is where you can make money while you sleep. Meaning that you work really really hard and you scale and suddenly you own real estate or media properties or technology or a system or a brand that people pay for without you actually doing any incremental work yourself.

3. One friend ran a very successful specialty school. He decided he wanted to start a division that would sell books about his system. The numbers on the publishing side were terrific (on the spreadsheet). The investors wanted 40% of the existing business in order to put up sufficient money to recapitalize everything and bring big company thinking etc. etc. I pointed out that this would not only ruin my friend's life, but probably cripple the economics of both businesses.

The alternative (which might work for you as well) is not to fund the business. It's to fund the project. That's how they fund movies. You don't get a piece of the studio. You get a piece of Rocky XIV.

If you've got something that works and you're ready to go to the next level, consider funding the expansion with the payoff being a scaling piece of the project. Maybe 100% of the proceeds until the investment is repaid, then 25% after that, forever. Once that project pays off, you'll be able to fund the next project, probably on even better terms. And on and on, with each project having, if you choose, different investors and different payout streams.

4. The real lesson is this: if you absolutely need a lot of money to do a particular business and the terms you'll need to accept to get that money are unacceptable, find a new business. Nothing wrong with that. The market might be trying to tell you something.

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About the Author: Seth Godin

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Seth Godin is a bestselling author, entrepreneur and agent of change. Godin is author of six books that have been bestsellers around the world and changed the way people think about marketing, change and work. Permission Marketing was an Amazon.com Top 100 bestseller for a year, a Fortune Best Business Book and it spent four months on the Business Week bestseller list. It also appeared on the New York Times business book bestseller list.
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