8.MY SOURCES OF FUNDING
For most start-up companies, funding is a big problem – in fact, it is often the big problem and thus the reason that they never really get started, or later fail. And even if as an entrepreneur you have a great business idea and the right team from the start, it is almost impossible for you to get the necessary funding if you do not understand the structure of the relevant finance markets, both in relation to start-up companies' situation and especially to investors' very different motives and limitations. In this chapter, we will review all of this.
As start-ups grow, they change their structure at a rapid rate and therefore they must continuously change their ways from development phase to development phase. Which phases are we talking about? In our view, one of the most practical phase descriptions are the six Marmer phases, named after Max Marmer,1 of which phases 1–4 are especially relevant to the start-up problem. These are described below, where the indicative amounts refer to the cost levels in the US.
Phase 1: Discovery. Here you start with your basic idea and need to further develop it by looking for a commercially viable product/market fit, i.e. a product that has a market. If this fails, you should stop the project to limit losses. Remember, if you keep your business very small at first, the cost of failing will also be very small. According to Max Marmer's Startup Genome project, the discovery phase takes on average about seven months, ...
Get Entrepreneur now with the O’Reilly learning platform.
O’Reilly members experience books, live events, courses curated by job role, and more from O’Reilly and nearly 200 top publishers.