A Startup with a Better Start: Kangaroo Style
You know the stats: An alarming number of startups fail. Depending on whose study you reference, 60-80% of startups fail in the first five years.
On the flip side, 92% of business who have made it at least five years will survive another five years.
Now we switch to kangaroos. Kangaroos are best-known for carrying their young in their pouch. When the joey is born, it is guided safely into their comfy pouch, to gestate for 120 to 450 days. Inside the pouch, the joey is warm, protected, and feeds by nursing. The mother kangaroo is even able to nurse two joeys at different developmental stages at the same time.
You probably see where this is going. Using the kangaroo technique, you give your startup a better start inside of an established business. Instead of starting a solo startup and spending 1/3 of your time seeking investors who may end up owning more of your company than you had ever hoped (their money is not free); buy a small business that is ALREADY generating cash and embed your startup inside of that company.
Let's say your startup idea is to develop a new SAAS-based security service. Think of how much value an offering like that would be to, say a physical security business that is already generating a million dollars a year.
Don't think you can afford it? You'd be surprised how affordable most of these small businesses are. If you can find a way to access equity or cash for 10% of the asking price you see, you can likely afford it. SBA loans and Seller Notes are typically your answer.
Millions of small business owners (often retiring Baby Boomers who have worked the business for decades and gotten the cash out of the business' life) are selling and from the listings I see, they are not greedy or unrealistic about their asking price.
Examples: A security door manufacturer in Oregon was grossing $600K with room to grow and open to a fair asking price for their established business. Imagine how that cash flow could be applied as R&D to your product development while it also raises the innovation and revenue opportunity for that established business and their existing customers.
Did I mention that the employees are already running the business so you can still focus on your innovation?
So, if you're sitting in a cubicle right now, contemplating your startup, but unsure if you're ready to take the risk, don't. Take away the risk and then make your dream a reality in the safe pouch of an established business.
Call me if you need ideas on what good businesses might be a good match for you. There are plenty to choose from.
Kris @ 425-830-0867