How I Financed My Startup

Commercial Capital LLCI have started writing posts about my experiences launching Commercial Capital LLC, my factoring company. My last post covered how I changed industries to launch the company. In this post, I am going to tell you how I financed the company.

By the way, this is not a tale of interminable venture capital pitches or meetings with high-profile investors. There were none. I did not use any outside investors for the launch. Instead, it’s a story of how I bootstrapped this company without any external financing.

Bootstrapping a company without venture capital or angel investments will not get you much publicity or notoriety these days. But it gives you incredible freedom. And it’s how most entrepreneurs fund their businesses.

I used three sources of money to finance my startup.

First source: My savings

From the get-go, my plan had been to launch my startup using my own money. I knew owning a business was a risky venture and I did not feel comfortable asking others for money, especially friends and family. So I did the only thing I could: I saved money and lived cheaply. Very cheaply.

There was no easy way about this. I lived in a cheap apartment, did not wear fancy clothes, and certainly did not drive a fancy car. I saved as much as I could.

However, I knew that savings alone would not be able to get me fully funded. Heck, as a factoring company, money is our product. And you need a lot of “product” to make money.

Second source: My lucky break (stock options)

As I have said in other posts, I was also very lucky. It seems that luck has played a central role in my career as an entrepreneur ever since I started. A few years before starting the company, I changed jobs and went to work for a growing telecom company. This was just before the dot-com bubble burst.

My compensation package included a small award of stock options. While my timing was not impeccable, I was able to cash those options and make a tidy sum. Not a lot of money, mind you. Just enough to add it to my savings and launch my startup.

Third source: My job

My savings and my newly cashed stock options gave me enough money to launch the company. However, they did not give me enough money to pay my living expenses while I worked at my startup. This problem is common for entrepreneurs.

I decided that I would start the business while working a full-time job. This was not an ideal scenario because I had a demanding job. However, it was the only way I could make it work.

The hours were grueling. I woke up every day at 5 am. After going to the gym, I’d get to the office by 7 am or so. Fortunately, my employer was extremely flexible (I have a debt of gratitude to my boss!) and allowed me to start work at 7 am.

I’d work hard until lunch and then go home to work on the business for 30 minutes. Then I’d go back to the office and work until 4 pm or 5 pm. I spent every waking hour after work focused exclusively on launching the company.

I kept this crazy schedule for quite some time. Once the business started generating revenues and become self-sufficient, I knew I was ready to leave my job.

Final thoughts

I used three sources of funding to finance my entrepreneurial habit:

  • Savings (over four years of it)
  • Stock options
  • A job that paid the bills

I am glad I did it this way. While it was not easy, the risk – and the reward – was solely mine. There is freedom in launching a business this way.

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