My new business (LegupHealth ) is ramping up. I'm starting to think about how I'm going to finance it until it's profitable. I don't want to give up any equity at this early stage, so I must consider non-dilutive funding options.
By non-dilutive, I mean funding sources that don't need me to sell or give away ownership in the company (i.e. equity or stock). Examples include personal savings, cash flow from other endeavors, and bootstrapping. Other sources include grants, pitch competitions, debt, and profit-sharing arrangements.
As I rank the various funding sources, I'm realizing how important it is to consider Return on Time (ROT). As a solo-founder, my most precious resource is time. So, I should invest time in efforts than have the highest ROT.
When evaluating a funding source based on ROT, the obvious return is money. But I must also include other returns like new relationships, exposure, and credibility.
For example, should I spend my time working another job to bring in cash flow? Or should I spend my time acquiring new LegUp Health customers to bring in cash flow? Or should I spend my time applying for grants and competing at pitch competitions to bring in cash flow?
The return on time for each of these efforts is not obvious. But it's probably worth my time to estimate it.
Great questions. If only foresight were 20/20...
Time is always the most precious commodity and it bodes well that you are taking the time to really consider how to not squander yours. Your best bet might be to keep the day job for as long as possible so your side-project doesn't become an expensive hobby (I've been there; not fun).
How much money do you need? If it's just a small amount then use grants and whatever you can, if it's a large amount then you may want to consider giving up some equity so you have the benefit of money and time.
I guess I technically don't "need" anything at the moment. I think where it gets hard with the planning is predicting when the business will "need" or "want' money in the future. These non-dilutive (and dilutive) sources take time to pursue.
This is the exercise I'm going through right now.