There are three types of entrepreneurs. Which type are you?

When getting funding, aligning your Entrepreneur DNA to the type of funding is critical to the success of your business, and more importantly, to your mental health! 

Think of your Entrepruer DNA as pre-coded rules or belief systems. You want funding and partners that align with those beliefs.

If you’re an introvert, doing things that require you to socialize and make small talk will always be a struggle. It doesn’t mean you can’t overcome it, but you’ll probably always feel uncomfortable. Funding is the same way. With the wrong funding type, you will hate your life, with the correctly aligned funding type, things will be sugarplums and roses (well, that’s an overstatement for sure).

What is Your Entrepreneur DNA

There are three types of entrepreneurs*:

Craftspeople - Craftspeople are driven by their art. They love doing the thing they do and want to do it better than anyone else. Being the best at what they do optimizes feelings of self-worth. Whether their art is project management, programming, graphic design, or fine art, the craftsperson takes pride in their work and does not want to outsource it to a team. They do what they do well and the world should know and trust their great work. 

Freedom Fighters - Freedom Fighters are motivated by independence. They value not having to answer to a boss and making their own way in the world. They are usually the sole owner of a business or have only one partner. Because Freedom Fighters value time freedom, they often build businesses with employees to help do much of the work. The most successful freedom fighters build a business big enough that they can step away for weeks at a time and the business continues to prosper. Freedom Fighters often see their businesses as an extension of themselves and refer to employees as family. 

Mountain Climbers - Mountain Climbers seek multiple big businesses and are driven by the game of building and moving among multiple businesses. The best Mountain Climbers are great at building partnerships, and managing multiple complex relationships, and are inspirational enough to bring people into their vision. A Mountain Climber has no problem giving away 70% or more of the equity of their company because they see the value of growing something big.

The Right Funding for Your DNA

While there are entire books written on funding options, here is a very quick guide to the types of funding that work best for each entrepreneur type.

Craftspeople - Since the most important thing to this type is mastering craft, answering to a boss (an investor can seem like a boss) is the equivalent of having a tooth pulled. If you can, self-fund by doing great work. If you need money upfront, pre-sell your work based on your portfolio. If you’re a chef (food artist) and have a great product you want to sell like your lasagna, do your art as a service until you have enough money to rent an industrial kitchen. If you sell graphic art, pre-sell by offering the original, then a limited number of copies. I know an entrepreneur that ran her entire business by pre-selling on Kiva. Every quarter she would decide how much money she needed for the next three months, then go to Kiva and offer her art. Once the specified number of people bought, she closed the “fundraising” and went and built the product. She was prepaid for everything. Consistently raise your prices as you become more and more in demand by delivering great work. Crowdfunded grants are your next best option. Less desirable are loans. Since your pay is limited by the amount of time you have to produce work, this will set you on a path where you will always be behind. And by all means, do not try to get any venture-type investment in your business. Investment in a specific project with a clear beginning and end (like a book or play) is different, a clear entry and exit can be successful because when the particular project is over, your financial relationship ends.

Freedom Fighters - For Freedom Fighters, there is nothing worse than a boss. Venture investors are essentially your bosses, and they will eventually force you to make decisions you don’t want to make. Their top priority is getting their money back through the sale of your company or a public offering. You, in many cases, will not want to sell your business. If it is earning you a good living and you like the people and product, you won't want to sell the business. Freedom Fighters should stay away from equity venture capital at all costs! If at all possible, bootstrap the business to get traction. Then, as you grow, you can use debt financing to increase production capacity as long as you can be sure the sales will justify the debt. There are many types of debt financing (far too many to discuss here) that will work based on your business model. A straight SBA or commercial loan may not be right for you. Perhaps revenue-based financing (you pay the loan as a few percentage points of sales) is a better option? Speak with a professional (like me) about the many different types of financing you can get to grow your business that won’t put you out of business.

Mountain Climbers - For Mountain Climbers, venture capital is the holy grail. Not only can VC’s bring money, but if chosen correctly they will also bring a network of customers and partners. With the right business, the problem for Mountain Climbers isn’t getting the venture capital, it is getting to the point where the business has enough traction to attract investors. Most investors want to see a product and sales process that can scale. To do these things, the Mountain Climber usually needs helpers with the skills that the founder lacks. A good salesperson usually needs someone that can build and deliver. A great product engineer needs a marketing and sales guru. Both of these entrepreneurs need a top-notch finance person to manage the money. This is why the Mountain Climber needs to be great at convincing others of their vision. It’s not just to get funders, it is to get early employees and/or cofounders to join in their vision at lower pay and more hours than most other jobs they can get. Once a company gets traction, with the help of a solid fractional CFO, it should be able to get angel and VC funders if they are lucky enough to be in the right funding environment. 

What to do Now?

No matter your entrepreneurial DNA, the easiest time to get money is when you don’t need it. We are entering an investment climate where funders (lenders and investors) don’t want to just see sales growth, they also want to see a profit.

First, if you can, build a business that is profitable. Then seek funding only for growth when you have proven traction and a profitable delivery system.

*Drilling for Gold - How Corporations Can Successfully Market to Small Business Owners" John Warrilow copyright 2002