Why Young, Dumb, Broke Aspiring Entrepreneurs Don’t Need Funding

Going from 23 with 6-figures in the bank to starting over on $1,000 revealed a huge surprise: Being “rich” was just a crutch.

Want to know the most common excuse I hear from aspiring wantrepreneurs (not entrepreneurs; wantrepreneurs)— specifically the ones who don’t end up getting very far? It isn’t about connections or competence or a lack of domain expertise — or any of the other hundreds of valid shortcomings that might actually hinder an early-stage aspiring founder’s startup success.

9.9 times out of 10, they blame lacking enough startup capital (i.e. money) to get their billion-dollar idea off the ground.

I’ve heard this from aspiring wantrepreneurs across the board — from those who are 15 to those who are 50 and beyond — and with respect to every proposed business idea under the sun. It could be a tech product, a service business, a physical product, any combination of the aforementioned, etc. The same excuse pervades.

I’m not going to lie and say money isn’t a helpful — in some cases crucial and necessary — tool to build and grow a successful startup. I am, however, going to suggest that money, alone, is not a big enough obstacle to prevent an entrepreneur from taking their first few steps. Or at least, it shouldn’t be.

The way you stretch $1,000 is a good predictor of how you’ll stretch $1,000,000

If you can’t get your startup to step one on $1,000 or less, do you really think you’ll be the greatest steward of a $100,000 or $1,000,000 check from a venture capitalist?

What many money-hungry aspiring wantrepreneurs don’t realize is that even if or when they do secure funding for their startup, there will be limitations. Most founders — no matter how brilliant and promising — will not be granted a blank check, a bottomless pit of $100 bills, or a limitless credit card. In business, money must always be managed — and carefully so.

It’s the people and companies that become flush with capital — and those who obtain that financial surplus at an expedited rate — who may be at risk for gross mismanagement of those funds.

That’s for one very simple reason, which is the double-edged sword of capital: Money lowers fear and heightens a person’s (or company’s) risk threshold.

Here’s what a surplus of money encourages for startups:

• Delegation
• Marketing
• Scaling
• Continued, diverse, costly experimentation

It’s pretty clear why: The more money you have, the more experts you can afford to hire to build each aspect of your business, from your product to your website to your marketing, and more. The spending possibilities are truly endless — and that’s the very problem. Before you know it, you’re just the conductor of your own orchestra — which might otherwise be fine, but in this case, you’re conducting an orchestra before learning to play one single instrument. As you can imagine, that doesn’t likely end well.

You’re conducting an orchestra before learning to play one single instrument…that doesn’t likely end well.

Here’s what a lack of money encourages:

• Resourcefulness and self-reliance
• You (the entrepreneur) must become an expert-of-all-trades
• Manual actions and doing tasks that don’t scale
• A thoughtful, analytical approach to obtaining tangible results

Even Paul Graham (Y Combinator co-founder) encouraged founders to “do things that don’t scale”, despite their acceptance into the most prestigious accelerator, $100k of YC funding, and the opportunity to pitch and potentially secure much more funding from the top venture capitalists in the world.

In other words, he encouraged founders to get their hands dirty, be scrappy, and find the nonscalable do-it-yourself methods to test their concept and gain traction, even if they were on the road to significant funding.

A surplus of startup capital does just the opposite; it gives you the fearless freedom to throw money at your idea and assume the more money you put in, the more money you’ll get out. Unfortunately, and to the surprise and dismay of many an entrepreneur, business doesn’t always work that way — especially early-stage or unproven startups.

I have the proof (and the -$100k+ receipts)

When I quit my Wall Street job, I’d been saving for more than two years and had 6-figures to burn. I didn’t plan to burn it nearly as quickly as I did, but here’s where those 6-figures started going within the first few months:

• $5k — lawyer (100% unnecessary — you can incorporate online for well under a thousand dollars these days…complex equity structures and changes of ownership may require more advanced legal assistance, but for your basic incorporation, it only takes about 5 minutes online)
• $10k — the second lawyer (Necessary for our industry, but didn’t need the top-of-the-line $580/hour lawyer. Also, never small talk with a lawyer — they pretty much bill by the millisecond.)
• $15k — wireframes from our developers (Think a digital mockup of your product (or app or website); you can make this for free or very cheaply using a mockup or wireframe builder. Don’t know how? The university of YouTube (and the mockup builder’s free tutorials) are your private coaches.)

Within a month, I’d spent $30k, and we hadn’t even begun work on the real product (which would go on to cost another $70k+)…

The next few months were spent on technology costs and labor, taking us past the $50k mark in no time. But here’s the kicker: Not a dime of that was spent on marketing. Even worse, I hadn’t muscled up my knowledge or domain expertise and learned one thing — other than how to QA an in-development app. My intellectual market value was waning, and I was procrastinating on the most difficult part (getting customers) by focusing all my time and money on the product.

It took me burning 6-figures, pulling the plug, and starting over entirely to realize that I actually had everything I needed to build a successful business without all that capital. In fact, the surplus of capital was a distraction. It made me set my sights on lofty (and expensive) product aspirations, with little regard for the market validation or my customers’ needs. Once you’re 5- or 6-figures deep spending your limited savings, you may not want to confront the realization that you may be building a product the world doesn’t need…

Being young, dumb, and broke is not a dealbreaker

I’ve worked with thousands of entrepreneurs, and there are three things I can guarantee:

1. There’s no such thing as too young — or too old

I call B.S. There is no age limit (minimum or maximum) for success in entrepreneurship — I’ve worked with entrepreneurs ranging from adolescents through retirees, and I’ve seen no correlation between age and success.

• Youth is an asset because you may have more runway and perhaps fewer responsibilities or financial or time obligations.
• Age is an asset because you have decades of wisdom, experience, professionalism, and connections.

When I was 8, I built an art business (on under $100) that I ran and grew successfully for over a decade. When I was 23 I built a tech business (on 6-figures) that I shut down within 2 years. By 26, I’d built three more businesses on a fraction of that cost collectively — the one that performed the best was built on under $1,000 and garnered me a 200x ROI within a few months.

Blaming your age for your lack of success or need for capital is a cop-out.

2. You’re not dumb, you’re just mentally lazy

Lacking domain expertise required to build your dream product or service sounds to a lot of people like a “hiring” problem; they simply need to hire the right people and delegate those tasks. It’s actually a “resourcefulness” problem.

It means you should start reading, learning, practicing, and becoming an expert yourself. Or find a more experienced equity-holding teammate; yes, they probably need equity to care enough to give it their all. Paying your problems away is not a good strategy if you’re paying away a core functionality of your business and you fundamentally don’t understand the task or skill for which you’re hiring. This is a great way to purge a ton of dough, maintain a lazy plateauing knowledge base, and anchor your success entirely to your employees.

If you feel that your employees add more value to your company than you do, you should be worried.

3. If funding is the real antidote, money will most likely find you

Please don't read that statement and think for even a second I’m talking about manifesting the money you need — that’s definitely not what I’m spewing here. I’m simply suggesting that if you take your business as far as you can go and money is the only thing standing between your company and its next level of growth and expansion, the necessary capital will likely find you. Here’s how money “finds” you when you really need it:

• You’ve proven a concept, and now your customers are asking you for more — but you don’t have the funds to front their requests. You ask for preorders so you can pay the upfront manufacturing or development costs.
• You’ve built an amazing prototype and explainer video, but you don’t have the capital to make the real thing. You throw up a crowdfunding campaign and your audience falls so in love with the product they surpass your fundraising goal.
• You receive unsolicited inbound inquiries from investors who’ve heard about your product, seen your crowdfunding campaign, or propose an opportunity for a synergistic partnership with one of their portfolio companies. This might sound like a fairy tale, but I promise this can happen — it’s happened to me. However, even if it happens, you’ll need the discernment to determine whether you really need that funding at all…

Age, IQ, and funding status usually aren’t the make-or-break-it factors determining an entrepreneur’s success — and using any (or all) of them as a scapegoat probably won’t advance your entrepreneurial journey either.

It’s 99% in your hands

The popularity of shows like Shark Tank and publications like TechCrunch that highlight 9-figure VC raises of pre-profit unicorns (not-yet-profitable startups valued at $1 billion+) perpetuate the fallacy that capital is the key to entrepreneurial success. Capital may be necessary, but it probably shouldn’t be priority number one from day one — and it also isn’t a catch-all solution to pay all your problems away.

If you want to build a business, there’s no shortage of education, information, tools, user-friendly technology, and resources out there. If you want to learn about an industry or master a skill required for your business, the same logic holds.

I’m not saying every company can get to 6- or 7-figures with zero outside help or funding. I am saying that every serious entrepreneur should do a lot more than deploy raised capital, manage employees, and watch others do the difficult or technical work they don’t understand. Learn a skill, acquire a customer, attempt to build the crappiest version of your product with your own two hands (and deliver it to that beta customer), or find a team member to join you in the trenches. If you aren’t stretching yourself, you probably aren’t doing it right…