
Unfunded? Unless your credit is totally in the toilet, you can probably get a business credit line to launch on your own - editor
http://www.work.com/getting-a-business-line-of-credit-7/
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mauricecheeks
2 things to keep in mind:

 _It is in the interest of seed funders to encourage you not to fund yourself
with debt. They want to ride the gravy train if you succeed.

_ It is in your interest not to fund yourself with debt. All probability
suggests that there is no gravy train for you, just debt.

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pg
This seems like a really bad idea.

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rms
It's a bad idea for a typical Web 2.0 startup but it's a great idea if you
have a clear path to profitability.

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far33d
Debt is only reasonable if you already have enough positive cash flow (not
positive revenues.. more money in than money out) to finance that debt.

But even if you have positive cashflow, it generally makes sense for young
companies to reinvest those earnings instead of taking debt investment.

If your business fails, then you still need to pay off the loan. So that's
what you get for not giving up your equity.

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nostrademons
"But even if you have positive cashflow, it generally makes sense for young
companies to reinvest those earnings instead of taking debt investment."

Not necessarily - or rather, it's often rational to do both.

It's rational for a business to take out a loan if the interest rate of the
loan is less than their expected return on capital. Interest rates for
business loans are what, 6-8%? It's not uncommon for a well-run, growing
business with a strong franchise to earn a ROC of about 25%.

Debt lets them grow faster, sooner, and then they can pay off the debt from
future earnings. It's often far more capital-efficient than floating an equity
offering, where the investors would get a share of all those additional
profits.

It doesn't work for web startups because web startups often have far lumpier
earnings. It's not uncommon for a web startup to be bought for multi-millions
before they earn a dime of profit. That's because their real "customers" are
big companies, who are paranoid about losing their market to an upstart. A web
startups users are effectively an advertising expense: spend a few thousand on
bandwidth to show that if you wanted, you could take over the world, and then
get a big company to buy you to prevent that from happening.

There are some web startups that employ debt financing very effectively. For
example, Akamai floated close to $300M of convertible bonds to fund its
expansion. As a result, it effectively acquired a lock on the content-delivery
business, which has allowed it to grow by leaps and bounds over the past 5
years. Without that debt financing, they'd either have to forgo their
thousands of datacenters in strategically-placed locations, or they'd have
diluted their equity so much that it wouldn't be worth it for them.

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epall
If your company goes south for any of a million reasons, who gets stuck with
the bill? If you've sold equity, you've spread out the risk according to who's
willing to take it. It's likely the founders opted to risk time more than
money, so they're not out anything huge. If you get a loan, somebody's gotta
pay it back at the end of the day.

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shsung
Unlikely, unless you have some idea that makes sense to a business loan
manager. You're relying on a non-tech person to see that your idea is a really
solid idea, which may or may not fly.

The other thing is that even if your credit isn't in the toilet, banks might
also want to take a lien on something valuable of yours, e.g., your car or
your house, since you essentially have no assets in your company when you
start. This is not always in your best interest, especially if your company
goes belly up. Liquidating a house or a car that might normally be protected
by bankruptcy is probably not going to be fun for you.

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yaacovtp
Not applicable for young web startups. Banks like lending to people and
businesses with assets and revenues not ideas. Plus, if you take on debt you
it makes it harder to cut and run if your idea doesn't pan out the way you
planned.

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jsjenkins168
I'm no expert but I distinctly remember Rahoul Seth say at Startup School NOT
to fund with debt in the early stages. Fund with equity and try to stay debt
free until after the seed and 1st VC round.

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zaidf
Reminded me of the supposed quote by Trump to his daughter upon seeing a
homeless guy...it went something like "Technically, he is richer than I am."

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mukund
Go for open source tool, learn them..use them, develop a solid business model
and use this as a starter to showcase your skills. If its rock solid, you will
get the recognition. Use this fame to seek out "real funds" to kick start your
dream projects. Atleast thats what we are upto. Embracing open source and low
cost solutions ensure you dont need a businesss credit line

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ClintonKarr
Might as well fund your start-up with scratch off lotto tickets while you're
at it.

