Launching software startups without funding

Everyone with an entrepreneurial spirit has probably worked on a side project – for example, a new iPhone app or a web project on startup weekend. Only a small number of people can afford to hire a professional agency to implement their idea from scratch. In addition, it is very risky to outsource software projects in this way. The budgets are usually high, but the completion rates are low. In this article, we will discuss how to implement and launch web and mobile apps with minimal or no investment.

Open-sourcing

If you are working on software that other people will potentially use, you should consider publishing it as open source. This means it will be available to everyone for free under a special type of license – for example, Apache 2.0. In some cases, you must rethink your business model. For example, if you were planning to sell the final product, you should consider monetizing support or customization instead. Open-sourcing is a very powerful tool because it creates a new distribution channel when more people download and use your digital product. Open-sourcing also lets software developers contribute to the project, which means you can complete your project without investments. Famous examples of open source projects are Notepad++, PHPBB, 7-Zip, and Ubuntu.

To open-source a project, you should have an initial implementation that shows the idea, even if it’s in only a very preliminary stage. The first step is to create a project on GitHub, then set up contributing guidelines and a description. It’s important to be really passionate about your idea, promoting it and evangelizing to attract contributors and followers. Don’t worry about someone stealing your idea. In reality, ideas are difficult to copy and the benefits of spreading the word and attracting contributors are much greater than the benefits of protecting your knowledge base. Another positive effect of this approach is that when the development enters its final stages, you have already acquired a group of early adopters, first users, and followers.

Recruiting developers

Another way to recruit developers for your project is to offer sweat equity. This is very popular among technology startups. A developer gets a small stake in a company in exchange for his/her contribution. To succeed in this approach, you must make potential candidates believe in your project. You can achieve this by putting together multiple assets (such as a solid business plan and a pitch deck), building a strong team, getting the support of advisors, and making a name for yourself in the local entrepreneur community. All of the above will cause developers to believe in your plan and in your ability to execute it.

The legal side of the agreement is also important. A developer who works for sweat equity doesn’t get paid; instead, the developer gets something that guarantees future compensation for his/her efforts. This requires some paperwork. Usually, it includes incorporating a company as an LLC and then filling out an agreement between partners. The agreement should describe the performance criteria, vesting period, and number of shares the contributor will receive. This might seem to be an extra expense, but to avoid possible issues in the future, it is a good idea to spend time and money on a lawyer who specializes in this area. The agreement takes effect after the documents are signed by both parties and notarized.

            There are different ways to meet software engineers who might be interested in working for sweat equity. Most likely, they have full-time day jobs and will be working for your project part-time. The engineers might be seasoned professionals who are interested in a side project or young college graduates who are eager to get experience and learn new technologies. To find potential candidates, you should attend various tech events or use online resources for tech entrepreneurs. Below is a brief overview of popular online resources for co-founder search.

CofoundersLab.com

CofoundersLab is a social network for entrepreneurs. It has members who are interested in finding co-founders or joining projects, as well as working for startups. However, one disadvantage of this resource is that many of its users don’t share information about their projects. Often, you don’t get a notification about new messages, so you feel disconnected. Additionally, CofoundersLab now requires a paid membership. You can search and browse profiles for free only within a short period of time.

PartnerUpList.com
PartnerUpList is a message board for entrepreneurs. It is dedicated solely to business partners and co-founders search. It uses a different model than that of CofoundersLab. Instead of creating profiles, users post information about their projects or what they are looking for. Most of the posts are very specific, so it is easy to narrow down your search according to your interests. PartnerUpList doesn’t require registration, so it is very easy to publish new ads. It also has a powerful Google-like search feature and is absolutely free.

Warriorforum.com

Warriorforum is a popular and established digital marketing forum. In its Joint Ventures section, visitors can view and submit posts related to business partnerships. Most of the posts are related to eCommerce, Web, and various types of online businesses. You can browse for free, but you must be a paid member to submit new posts or reply to existing ones.

How to get funding

There are a few options for getting startup funding. Below are some that you should consider.

  • VCs and angels. To explore this approach, you will need to find groups of investors who are active in your geographic area. Often, you can connect with investors at various pitch events for startups.
  • Startup accelerators. Some of them provide limited funding for participating startups. Most popular are 500 Startups and Y Combinator. Some startup accelerators require you to relocate and work on your startup full-time. Throughout the process, they will prepare you and help you connect with local investors.
  • Crowdfunding. The most popular crowdfunding platforms are Kickstarter, IFundWomen, and SeedInvest. Joining crowdfunding platforms is a good way to test your idea. It also helps spread the word about your project, as well as find followers, early adopters, and potential clients.
  • Grants. Several government-sponsored organizations, such as SBA.gov and SCORE, support small businesses. They offer free trainings and mentoring programs as well as help you connect with investors.

You have more chances to get funded using the above sources when you have:

  • a team, including sales and marketing
  • minimal viable product (MVP)
  • a community of users and followers
  • a startup pitch deck and a business plan

Bootstrapping

Many entrepreneurs prefer to forgo using investors’ money and, instead, to finance their businesses using their own funds. This approach offers many benefits. When investors get involved, they take a share of the company and you must share profits with them. Bootstrapping means using personal money to start a business. This includes different sources of funding, such as savings, credit cards, and loans. The best scenario is to start a self-sustainable business that quickly breaks even, so you avoid significant debt. It also teaches you how to develop a business in a frugal way and with a minimal budget.

Development with a minimal budget

Imagine that you received funding for your project, but the amount of money you received is not enough to implement all the functionality that you planned. This often happens when you use funds borrowed from your friends and family. Now your goal is to build and launch a digital product with a minimal budget. How would you tackle this? The common approach toward saving money is to outsource your project and have it done offshore. The most popular counties for outsourcing are India or those in Eastern Europe. Outsourcing has proven to be less expensive than hiring a local agency. However, there are additional risks and complexities that you must address. The major problems are communication, culture differences, and different time zones. Those factors often lead to complete failures. The situation becomes especially difficult if you are not a tech person or you don’t have experience working with freelancers. There are several well-known rules for mitigating the risks, such as:

  • use milestones and release funds only when you are satisfied with the work
  • for non-technical folks, find an onsite tech lead to oversee the offshore team
  • use checkpoints and communicate frequently to track progress

Below are two of the most popular resources for finding freelancers, each of which uses a different business model. In addition, there are numerous competitors who have copied their approaches.

Freelancer.com – the most popular online marketplace for connecting with software developers and web and graphic designers. After you post a project, you will receive bids from members who are interested in it. The next step is to accept a bid and award the project to a freelancer. After this, you will use a dashboard to communicate with the selected contractor and release funds upon milestone completions.

Fiverr.com – another useful resource for outsourcing creative tasks such as logo design, SEO, photo editing, etc. After you place an order, it will be queued and implemented within a few days, depending on the number of orders in the queue. Initially, every gig was $5, but now most of the gigs are more expensive. For $5, you might get only a basic service which often looks like a teaser. Though this service has some issues, it is worth using for the numerous small tasks that are required for launching a business.

Next steps

After your working platform is up and running, the most important step is to get traction. This usually includes promotion, user acquisition, and SEO. This stage also requires funding. Therefore, here, the same lean approach is applicable for saving money. You can try to outsource such tasks as content creation and online marketing as part of your SEO strategy. Finally, if your web resource starts getting traffic, you should monetize it from the very beginning and re-invest money into the project. You can do this by placing direct ads or using Google AdSense.

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