Just as a carpenter needs to select the right tool for the job, an entrepreneur needs to select the right financing vehicle for her business. For many of the start-ups I come across, VC is definitely not appropriate. For others it could be an option, but it’s not the only one.
I enjoyed this story in last week’s New York Times. Rather than give equity to VCs in exchange for money with which to hire employees, the founder chose to give the equity directly to employees:
For the first year and a half, none of our 13 employees received a paycheck (…) Some lived off their savings, some did other work on the side or lived with their parents.
It is a very similar approach to the one we are taking at Ajah where the company is being funded with sweat, savings and a little help from a government grant or two.
- Bootstrapping a Start-Up in Silicon Valley (boss.blogs.nytimes.com)