Remain self-funded as long as possible -Garrett Camp
This quote is something i believe in 100%, and in all honesty, i tried to apply it, to the best of my possibility. Garrett Camp is a big name in tech, having co-founded stumble-upon and Uber among other tech oriented companies.
This is a quote that mostly concerns tech startups, it does not concern standard businesses. To launch a business you might need a loan from the bank, from friends and family. To launch a startup is sometimes similar to launching a standard business, thus the same type of funding might apply. In these cases, the loans that are usually paid back and are not in exchange of equity. But most startups have a different type of funding, one that relies on giving equity.
Startups are no standard businesses, there are other factors that come into play. It is not only about launch and operation, it is also about speed and taking over sizable market-share. Furthermore, startups are born national and international, it is not like a small business that starts in a small town then after 30 years of success becomes available nationwide .
The pressure for startups to grow fast, requires big amounts of money to be injected frequently, and these startups are usually losing money during many months even years.
To cover the burn rate amount (check: burn rate definition), founders have to either borrow money or find investors, in tech it usually is the latter. Investors take equity in the startups, and thus the percentage the founders have is reduced slowly.
Now to the quote:
Remain self-funded as long as possible.– Garrett Camp
This quote is a great advice, an advice that comes visibly from a vast experience. Why?
He tells founders to remain self-funded as long as possible, he knows that you can not remain self funded forever. But the key meaning in remaining self funded as long as possible, is to avoid the very early pre-seed and seed investors, these types of investors take big percentages of the company for a small investment of money.
For example: a typical $100k for 20%, gives the early investor 20% of the startup for 100 000$. But usually this money is used up by the startup fast, and then the startup needs to raise another round then another round and so on … Founders lose their power in the company by giving up too much too early, hence avoid getting investors too early. Remain self-funded as long as possible.