Energy Is Neither Created Nor Destroyed

Every engineer understands this maxim but when it comes to launching their new software company sometimes they forget that the principles of the universe apply to management of software companies as well.  

I have the good fortune to talk to dozens of software CEO's across Canada and the US every month.  Once they have worked long nights and weekends with friends and family (living off their spouses salary and some consulting gigs) to get a product ready for market, they seem to think that the next logical steps is to raise Equity Capital.  How much?  The number I hear most often is $500k to $2m (don't want to get too diluted).  

Here is the problem.  Equity funding (above $50k friends and family) is REALLY hard to get in 2008.  Almost impossible for a first time entrepreneur who has no track record. The problem is that most entrepreneurs won't find this out until they have spend literally hundreds of hours and much of their remaining cash trying. This is a lot of energy spent with no result.  

So what is the alternative? SELL PRODUCT.  Take the time that you would have spent pursuing financing and get out there and sell your product. The nice thing about software is that the margins are so high, that you can make a few sales go a long way.  

Who do you sell to - we can cover that in another blog.  

How do you sell - that too is another topic - but here is a clue.  There are some amazingly qualified sales "boomers" who aren't ready to retire and might just get a kick out of working with a start-up - again.  

So the message is - when you have very little "energy" make really sure you are spending it on the things that will provide the best return. In Canada, in 2008, that means selling.  Oh and by the way - there is a recession.  Customers are still buying - but expect a much longer sales cycle.
Posted by , Vice President on 25 November 2008
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