All of you Marx-loving skeptics probably are wondering where all of our capital came from. After all, $153,000 (our losses to date) isn’t exactly the kind of change you find when you clean your sofa. (See our previous post on profit/loss over the past 4 years.)
The answer is: we were under-capitalized in the beginning, and have been scrounging ever since. Banks do not lend to new businesses, or un-profitable businesses, making us double-disqualified. Venture capital might invest in your tech startup, but not in a local grocer. The only option available to many aspiring entrepreneurs is to put their house up as collateral on a business loan, but neither Andrew nor I owns a house. We started with about $8,000 of our own money, and Andrew at one point took a job downtown and added $14,000 over the course of a year. We also got a big start-up loan from Andrew’s dad, for $30,000 and later expanded to $35,000. Other than that, it’s been a mix of small and medium loans from friends, and $15,000 in high-interest credit card debt (which we were finally able to pay off this summer).
If I were doing it again, I’d start with $250,000. There were so many points in our growth where we were constrained only by our access to cash. Not to mention the stress of always being $10,000 to $20,000 behind in paying bills.
Here’s a chart of where our money came from:
|Misc other friends||$12,000||0%|
That’s to cover $153,000 in losses. We made up the remaining $39,000 by hook and by crook. Mostly we paid bills late.