“Product Creation = Value Creation; Pick only three features to test.”
This is the second article in my series on Phoenix Startup Week (PSW). This week I wanted to share some of the insights on funding startups including bootstrapping, buying money, and borrowing money.
Sarah Benken, the founder of Metros Other Woman, runs a service that helps offload tasks from busy people. She bootstrapped (self-funded) her company and discussed how you could bootstrap yours.
First, she was very targeted. She grouped her buyers into buckets: old money, movers and shakers, women business owners, established entrepreneurs, mommy groups, and bachelors. Then she developed strategies for each group: what events to attend, where to advertise, what groups they belong to, and places they go.
Her second rule was to only pay for sales (get rid of big marketing spends). She had two key ways of doing this. She created an exclusive Brand Ambassador program and recruited people with a large social following. The Brand Ambassadors got free services and cash kickbacks for acquired customers. She has a simple Brand Ambassador agreement and used unique URLs to track results. Ambassadors also had to submit a monthly report.
Her second rule was, don’t leave money on the table. For people that did not make the cut to be Brand Ambassadors, she created an affiliate program with smaller kickbacks, no free services, and no monthly reporting.
Gregory Lim is a strategic advisor and growth consultant. He helped Spiritual Gangster, a yoga clothing line, double their growth rate to $2M in revenue. If you get the marketing right, you can buy money. Here is his process:
- Start with Strategy – What is your brand and message.
- Gather Customer Insights – What makes your customers passionate? How do you make an emotional connection?
- Capture Actionable Data – Track the things you need to make decisions on, like the conversion rate.
- Launch and Learn – Perform small tests of hypothesis to see what works. Customers tell you what works.
- Scale What Works – Once you reliably get your Customer Acquisition Costs (CAC) to you Return On Investment (ROI) target, put more money into marketing. Sometimes you need to consider the Lifetime Value (LTV) of the customer and period to payback you need.
Craig DeMarco, the founder of Postinos (a nice wine bar in the Phoenix area), told his story about raising money to start his restaurant. He signed a lease on a property without having the funds to afford it. He had a one-page business plan and went to the nearest bank. The banker told him his plan wasn’t any good and would not fund him. He asked the banker what changes he would make. Then he had a two-page business plan. He went to 10 banks repeating this and having the bankers improve his business plan until finally, the last bank approved his loan. His father seeing his dedication decided to loan him the money instead. The rest is history.
Where there is a will there is always a way. Until next time, cheers!
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