Before money, people also have aspirations, dreams, passion, thinking, and a yearning to create—to think differently and break out of old patterns to solve the toughest problems, even with extremely limited resources.
1. Instead of pursuing investors, learn how to make investors pursue you
A wise baseball batter does not swing before the pitcher makes the throw.
A wise investor likewise will not invest if the company they are considering has yet to show certain “signals of success” for the future.
Of course, this signal needs to be detected early, sometimes when it is not yet clear; that is what makes a real investment opportunity. But the startup needs to take practical action to create certain “signals,” which investors can then recognize.
In this case, a “startup on paper” is like a “ball” that has not yet “left the thrower's hand”—nothing proves the startup's actual abilities. An intelligent investor therefore has no reason yet to invest in it.
To get through the “fundraising battle,” a Start-up must make results appear, however small. A Start-up does not yet need to be Successful, because success can be broken down into small successes. These “small successes” are the “signals” that make investors “eager about the investment opportunity right before them” and “line up” for the “privilege” of investing in you.
So what are those small successes? They might be:
Qualitatively:
1. Have a strong team of Founders
2. Have experienced Mentors
3. Have effective, hard-to-copy proprietary technology and/or business know-how that gives the Start-up a competitive market advantage
4. Have good partners or relationships
5. Have a product Demo
6. Have a Prototype
7. Have an MVP (Minumum Viable Product) and be able to officially offer it to the first few customers
8. etc.
Quantitatively:
1. Initial number of users
2. Number of customers who have purchased the product/service
3. Website visits, conversation rate: visit -> visit a 2nd and 3rd page -> access product information -> purchase
4. Brand Awareness among the Start-up's target customer community (frequency of coverage in reputable publications, brand recognition — for example: 3/100 means that of 100 random people asked, 3 know this Start-up)
5. What matters is the weekly and monthly growth rate of these metrics. Investors will track the Start-up's growth in these metrics for several months before deciding to invest in a major Deal.
6. etc.
2. The chicken-and-egg problem
To produce a Result, a Start-up needs Resources.
To use Resources, a Start-up needs to cover the Costs of those resources.
To pay Costs, a Start-up needs Investment Capital.
Ultimately, Startups need $ Money.
Briefly: Startup has money -> has results
But What if a startup has no money?
The founders now fall into a mental “trap” in entrepreneurship: money is needed before results can be created.
Their dilemma is this: investors need startups to have Results before investing Money, while startups need Money to produce Results.
The chicken and the egg—how do we solve it?
The result is that without investment, the startup produces no results, and without results, it receives no investment. It stands still until the founders abandon their dream, thinking, “Without money, nothing can be done.”
So what do people have before they have money?
At this point, a startup must be creative enough to produce results without costs. That is each person's talent and art of entrepreneurship.
Some examples of how a smart entrepreneur (Smartrepreneur) solves problems:
- No professional investors needed yet; invest your own money
This money can come from many sources: themselves, or the 3Fs: friend, family, fool (foolish money—just kidding, do not target that). They cover all operations themselves to maximize the company's value before bringing in professional outside investors.
On the other hand, if investors see that the founders are not putting in their own money, they will hesitate and believe the founders do not truly trust their own chances of success, and therefore are not “betting” their own money on the project they keep calling their “passion.”
Whenever I join a game, I always make sure everyone has “staked” themselves in it; otherwise, I step back.
Founders may say, ‘We don't have much money.’ Agreed, but clearly no one is forcing you to invest billions here. Investing as much as you possibly can, ‘even just one đồng,’ shows you are truly ready to fight. Investors love founders with that fighting spirit.
- Converting salary into equity
Instead of needing cash to hire and pay employees, the founders work without salary but receive equity rewards.
The project leader bases proportional shares on each person's time, effort, results, and the importance of those results, thereby determining the percentage of equity shared among the founders.
Remember: “Praise Effort, but Reward Results.” Team leaders should therefore break the project's shared goals into KPIs for each founder, agree on the percentage of reward equity and clarify what happens if KPIs are not met.
- Negotiating payment
I once sat down with a startup founder who was my student. He was troubled because he needed to purchase order A to supply partner B, but had no capital to buy A. There was actually a very simple technique he did not yet know: he could pay 30% of order A's value and negotiate a later deadline for the balance, while also receiving an advance from B and using that very money to pay the 30% for A. Things turned out very well afterward. In fact, there is nothing new about this approach.
Previously, I started a business that needed IT infrastructure to operate. Conventional thinking would mean raising 1 sum of money, C, then paying IT company D to build the system we needed. But I lacked the expertise to assess and select company D, especially regarding “after-sales” service: maintenance, bug fixes, or upgrades after payment could become a “nightmare” with an irresponsible, unenthusiastic partner. So the founders approached a successful IT company that already had a nearly similar system and offered it equity in my company in exchange for investing the entire expensive IT system (not cash), adapting it, and delivering it “turnkey” for us to use, in return for around 20% founding equity. I shortened the fundraising process and brought a strong IT company's full resources to support us. Its general director, a strong IT expert, joined our board of directors to help oversee and develop technology and advise on related matters. More importantly, the IT company became our shareholder, putting us in the same “warship”: our success was theirs, so afterward they were quite dedicated to supporting us through the “after-sales” stage.
Although, given another chance, I would have more experience and could do even better, this is another “bare-handed” fundraising technique that lets you obtain resources and create results before having money, then turn those results into money. There are many such smart fundraising techniques—use your brain.
Always remember: before money, people have aspirations, dreams, passion, thinking, and a desire to create, think differently, and break out of familiar patterns to solve the toughest problems with extremely limited resources.
That makes the entrepreneurial journey truly fascinating, and that road is still waiting for you
Tạ Minh Tuấn – TMT – is a successful entrepreneur pioneering several startup fields in Vietnam, 1 of Vietnam's 30 most outstandingly successful and influential people in the prestigious “30 Under 30” ranking by Forbes, the world's leading business magazine, and the founder of YUP! Start-Up Education & Incubation Centrer (www.yup.edu.vn).
