The Startup Resource More Valuable Than Cash
Cash may be the lifeblood of a business, but bartering is an underused resource--particularly among startups.
In the formative days and weeks of your business, everything will take twice as long as you think with twice the amount of effort. Believe me. I still have the scars.
At Rand McNally circa 1999, in the throes of what would become the height of the Internet bubble and about 15 months before it popped, we shelled out multiple hundreds of thousands of dollars for a personalized e-commerce platform. In hindsight, the move ended up costing us big, as we could have done without buying the platform for about two years. It wasn't a current need and, likely, took away about four to six months of additional runway for my Internet subsidiary.
To preserve as much cash as possible, consider bartering. At the Startup Factory where my partner and I invest in and mentor 26 portfolio companies, I have become the "barter king." You're never too big or too rich to strike a cashless deal.
Here are three resources to barter for to preserve cash:
1. Office space and furniture. I firmly believe that you and your co-founders, contractors, and early employees should find a space to work together. I also don't think you should spend a lot--or anything. You might barter for space from either a more mature startup that overbought for future expansion or a large company that's downsizing. I constantly scan for businesses closing up shop and have naturally become one of the first calls when they need to dispose of furniture. I've stocked my office, as well as a few of my portfolio companies, this way. What can you give in return? Sometimes it is as simple as the energy of a filled office. You might also consider offering to participate in their product feedback loop.
2. Advice. I have written many times that you should get advice from your region's best and brightest. I just don’t think you need to pay cash for it. Besides, the best advisers don't want cash anyway. The DNA of an entrepreneur has a natural pay-it-forward element. Mine it. Stock options are an easy bartering tool.
3. Content or product. Whether you run a tech company that needs relevant, expert content, or a retail store that needs to fill your shelves with products, your vision and your activity is of value to these providers. Offer to promote their brand in all of your activities, or provide them access to your customers. You don't get what you don't ask for, and you might be surprised how hungry they are to build out their business.
Many startup founders plan for a success point two to three years out and make purchase decisions with the assumption that they will get to that point. They optimize for that future milestone, as they are optimists, of course. Barter for some of the key early items and you preserve some cash and hopefully keep the lights on long enough to get there.
CHRIS HEIVLY | Columnist | Managing Director
Chris Heivly was a co-founder of MapQuest (which sold to AOL for $1.2 billion), sole managing director of 77 Capital (a $25 million venture fund), and an executive at five software companies. Currently, he is one of two managing directors of The Startup Factory, a seed investment fund making 10 to 14 new investments per year. A national writer and speaker about startups and startup communities, Heivly is also the founder of the Big Top Job Fair.