
Ask HN: How to get initial funding for an idea? - badrabbit
I have a few ideas I think are really good. My job pays me well but the better ideas I have cost a lot of initial money to develop even a small proof of concept. As I understand, VC&#x27;s want some proof of concept and market acceptance testing before a seed round. Banks require some proof of business proposal validity as well. I have no rich friends or family, how do I get to the stage where I can even think of applying to YC or other VC firms?<p>To be clear, The ideas I have in my opinion are not high risk (worst case you break even after a few years).<p>Apologies for my ignorance if there are better  sources out there. Asking here because I have received valuable advice on HN from asking similar &quot;noob&quot; questions.
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soneca
> _" To be clear, The ideas I have in my opinion are not high risk (worst case
> you break even after a few years)."_

It's good to be optimistic, but not naive. The worst case is that none of your
ideas will ever generate a single dollar of revenue. Actually, I would even
say that the most likely case is that you will never reach break even.

With your naive assumption you can get into unnecessary debt and now the worst
case is that you lose all your financial reserves.

> _" the better ideas I have cost a lot of initial money to develop even a
> small proof of concept."_

I would think very hard to find a way to validate these ideas without that
much of initial money. I am honestly don't trust your judgement now that it is
impossible to even test without a lot of money. But if that's really true, it
means that you want to build something that requires a lot of deep expertise
and/or infrastructure (like a new self-driving drone or a new drug). The only
people who get money to work on these kind of projects are researchers within
a big company or entrepreneurs with an impressive track record of success
(think Elon Musk).

So maybe these ideas are not for you.

~~~
badrabbit
So, it is nothing on the scale of that. But things like land,real-
estate,equipment are cash intensive. For example one of my better ideas will
work with an app and a lot if infrastructure. But even at a very small POC it
will cost at least $50K which isn't an earth shattering amount but still too
much for me.

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_JC_Denton
Rather than build your idea, which you say requires a lot of money, prove that
people want to pay for it. You CAN do this without building the idea.

This will force you to get out there, actually talk to potential customers,
and sell it. This is one of the hard parts of executing on an idea.

I know one entrepreneur in your boat who recently cold outbounded with a
PowerPoint and some design mockups, and managed to get a number of LOIs signed
from buyers in his target market. That proved to investors that 1) people
wanted it, and 2) he could sell it. He raised a non-trivial sum from a known
VC firm.

~~~
badrabbit
You have a really good advice, I think I need to work on my salesmanship or
find a cofounder. Actually collecting stats sounds nice, maybe a video clip of
actual in person consumer interview might help too. Answering the market
demand question is where I struggle. Many of my idea are not proprietary so
anyone can pay someone more experienced to knock me off which worries me.
Thank you!

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coderintherye
Validate your idea by getting users. Site building tools are ubiquitous now if
you want to test out anything ecommerce.

For everything else, you can use a Google Form or just go out walking around
town surveying people and seeing if they'll sign up to your list based on
telling them your idea.

Ideas are not valuable unless you can show that you can execute on them and
you don't need much money to show that, at least to start.

~~~
badrabbit
But here is the thing, if I have a site to validate my idea,what stops someone
with more resources from knocking me off before I get funding? Execution speed
is important, but I can validate by asking potential customers and doing some
leg work, I thought that was not enough for funding and loans

~~~
coderintherye
Well, true that investors will ask how well you can capture the market you are
targeting. However, what that really boils down to is whether or not the
investors believe you can execute well. Actually, sometimes investors will
throw _more_ money at you if they think it is a competitive market but believe
that you can become the market leader first. After that, if you do well at
building a good brand, then you'll get customers based on that, regardless of
the competition that pops up.

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kohanz
Have you talked to a lot of people who would be the customers/users of said
"ideas" in an attempt to validate them? Remember, casually asking family,
friends, or co-workers about such things is very unlikely to provide real
feedback.

Highly recommend this book on the topic:
[http://momtestbook.com/](http://momtestbook.com/)

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ishwarjha
Initial funding will come from yourself, friends or family. If you are trying
anywhere else it would be a waste of time.

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muzani
IMO, you should always sell the product before you have it. Prove that people
are willing to throw money at it.

There are a few tricks you can try - you can put up a shopping cart that
crashes into an 'out of stock' dummy page and then track the number of people
adding to cart. You can put up a few real world banners, track how many calls
you get, then tell them that the system is down. You can visit people with a
powerpoint presentation.

Don't be a tire kicker though. Just do it as if you're going to do it, then
move fast to secure it.

Another easy trick is to look at what people have hacked together. Everyone
has a competitor. Yours is likely an excel sheet somewhere. The competitor for
the first car was the horse. The competitor for combat planes were balloons
and zeppelins.

~~~
badrabbit
I think it really depends on the product, selling goods and online services is
easy but having a brick and mortar component is what makes the costs
skyrocket. Perhaps I should try things with a low barrier to entry at first.

~~~
muzani
Sorry, that was not very well phrased. What I mean to say is that startups are
about minimizing risk.

A business model canvas helps you highlight what hypotheses you have. You go
through them and minimize each one. Often the highest risk hypotheses are
regarding costs and income model.

Seed funding is originally about just about getting enough funding to prove
all the hypotheses. You can validate food by finding a delivery partner.
Fashion can be placed in clothing stores. Film can be started with YouTube.
Just a minimum viable product for each.

I'm not sure exactly what sector you're doing, but there's another model you
can consider for brick and mortar. The product developer designs something,
stockists (logistics/management/mentoring) buy in bulk for about 30% of retail
price, agents (sales) buy from stockists for about 70% of the retail price.
You end up with a 8x markup but it's a really low capital model because the
people at the end of the chain give you the money.

VCs only take super high returns; they are experts at reducing risk and tend
to not value something moderate risk. There are VCs for non-tech companies as
well; you want a VC who's a pro at reducing risk in your sector.

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vpEfljFL
If your idea is not labour intence (e.g. bringing new drug to the market) then
you can do mvp within weeks or several months depending on how much corners
you can cut.

If you can't code then probably you can save couple of thousands and ask for
help from someone else (e.g. hire overseas labour from low cost of living
areas to build the mvp for you).

