What Is A Start-Up Business?

By Hank and Sharyn Yuloff

I had an interesting conversation over the weekend with a start-up founder. She reached out because she thought she might be interested in our marketing services.

She stated that she is a creative type, not really a business person, so she’s looking for some business guidance.

I made an assumption that, like most creatives, she didn’t have the funds to hire us, so I asked her if she had funding. She stated that she thought that’s what a start-up was: a beginning company with no funding.

I explained that most successful entrepreneurs start their venture with at least a few dollars. Many work at a job until they’ve saved enough funds to invest in starting their business.

This founder, I'll call her Jane for easy reference, is also looking for investors. I explained that most investors, unless they are relatives, want the founder to have invested at least something into their own business so that the investor knows the founder has some “skin in the game.”

Jane then asked: “How much ‘skin' is usually expected?”

In our experience, it depends on at least two things: how much funding a founder is looking for, and how well the investor feels they know the founder.

More specifically: if you are only looking for a few thousand dollars, an investor probably wants you to have at least that much invested in your own business as well.

However, if you are looking for millions, an investor, unless they know you very well, probably wants you to have a few hundred thousand invested.

Jane also wants to hire others to help her find investors so that she can be left to create. I explained that most investors will want to meet with the founder, not just her team. It is not unusual for the startup team to dissolve, or morph, for any number of reasons; but the constant will be the founder, so she must remain involved.

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