A lot of people wonder how Dena and I handle finances at Groundwork! and I’m going to share it all right here, in hopes that it will be either useful or inspiring. Keep in mind that neither of us had capital to contribute to Groundwork! nor did we have any personal money in savings to cover our own cost of living. It has been a wild, uphill battle that we are still fighting but I am certain we will come out on top. Here goes:
1. Build community for free
Dena and I were inspired by a coworking space called Indy Hall in Philadelphia. One of the co-founders, Alex Hillman, wrote a blog post called How to Fund a Coworking Space. In the post, Alex encourages a bootstrap model where the first step in the business plan, building community, costs $0. So we were off to the races, building a website and searching for folks in the New Bedford area who might be interested in coworking.
2. Crowdfund for seed money
We chose to kick things off with a crowdfunding campaign using the IndieGoGO platform. There were a few reasons for this decision. First of all, crowdfunding forced us to produce a ton of marketing materials and establish ourselves online. Secondly, our contributors became our close circle of cheerleaders and supporters, which is almost as crucial as having money. Thirdly, crowdfunding helped us to establish social proof: with a good number of real people willing to put money on our idea, it would be easier to approach investors. We raised $7,535 from 65 supporters during our IndieGoGo campaign.
3. Beg friends and family to invest
We decided to avoid “rich men in suits” at all costs when it came to funding Groundwork! According to our business plan and proposed budget, we figured we could get off the ground for about $30k. We aren’t a Silicon Valley-style rapid growth startup, so approaching venture capitalists didn’t really fit our model. We convinced three investors in our close personal networks to put in $10k each. Our investors each get 5% equity in Groundwork! along with some voting rights as members. There are lots of different investment structures to explore, and this one worked for us. If this sort of thing is all new to you (it was to us), I recommend getting a good lawyer or accountant on board to help out.
4. Explore grants and government funding
During our initial community building and exploration phase, Dena and I connected with the New Bedford Economic Development Council. This connection turned out to be key. The NBEDC offered to rent us our dream space in a city-owned building at a very affordable subsidized rent. But then it got even better: we partnered with the EDC and the City of New Bedford to get a grant to remodel the space. The MassDevelopment TDI Grant is funding the buildout of our space to the tune of $150k. Although this money does not cover any of our furnishings or operational expenses, we would have been sorely under-budget if we had to cover buildout costs ourselves.
Word to the wise: grant applications basically suck, so make sure you are well qualified before you spend your limited time applying for one. In our case, we wouldn’t have had success without partnering first with city government.
5. Get used to being broke
This is the cold, hard truth: if you aren’t sitting on a huge lump of cash, starting a business is pretty damn hard. How are we doing it? Dena and I both have part-time jobs and freelance gigs to supplement our income. We live check-to-check. We’ve both been broke for about a year and we still have a ways to go. We exercise positivity and good humor. We find pleasure in the simple things and spend time in nature to stay balanced. We remind ourselves every day that we are building a dream, and that is worth so much more than the security of a paycheck.
Yesterday I spoke with a man in Fall River who owns his own web development company. He told me he worked for five years before he took payroll. Last week I met a woman who owned a bookstore, worked full time at City Hall, and used her paycheck to pay the bookstore clerk. My own dad went into serious credit debt to purchase the vehicles he needed to start his airport shuttle business. He tells me that he took the leap because he was 100% certain he would be successful.
At the risk of sounding corny, I believe that what these people did and what Dena and I are doing is the great American Dream. You don’t need the best idea in the world or a big check from an angel investor to start a business. You just need the faith and determination to execute.