How far can I go as a Startup with $20k in funding?


kiosk

At a local Starbucks, I bumped into 3 high school students at Starbucks discussing their homework task – if given $20k to start a company, what kind of business should they enter, write a business plan, and show the rate of return? They told me that they would set up a clothing store in San Diego. Now, I thought that the industry sounded familiar.  Some years back, while chairing a panel on high school students’ business plans, I noticed that many seem focused on the retail clothing industry – a very competitive market. Maybe it was a coincidence or a prevalent interest of high school kids interest in clothing.   Then, I remembered a professor’s definition of economics – the management of limited goods. In other words, how can these 3 high school kids maximize the utility of $20,000, and grow it for a decent rate of return.

And I recall hearing rags to riches startups that invest only several hundred dollars to create a publicly traded company.  I view such stories with some skepticism since some companies require substantial capital for startups, more specifically, in the health industry with their costly FDA approvals and expensive staffing.  On the other hand, a software company only requires a PC and tech labor force to create a “shrink wrap” product that can be acquired for millions (or in some cases, billions like Snapchat)   — although I feel that this particular market segment is harder to identify.

And I found myself suggesting to the high schoolers to think out of the box: think of the competition, worry about real estate, or maybe combine technology in this clothing business space.  I suggested why bother with a store: rent a kiosk, decorate it with actual samples on the surrounding racks, while using iPads to demonstrate other color selections. With this approach one is not burdened with recurring rental costs.  I remember that a San Francisco Nike store allows customers to modify the look of their running shoes through an iPad app.  And I thought that approach could be used for clothing.

And recently, I have been pasting together a business plan dealing with health devices and their sensors.  And, since I attempt to keep au currant with technology trends, I had to make sure that big data would be available through the devices. Again, I thought of my financial limitations in the budget: what it took to acquire the technology, improve and market it for the marketplace.  And when one adds the General and Administrative costs as well as leases, then one figures out how long that does budget will last.  Everyone then concludes that “economics” dominates the strategy of a company.

So the difference between the business development of a $20k project and anything else larger is the just the number of “zeros”.  I could only suggest to those high school kids that they look at the competitive environment first.  I always believe that clothing retail industry is highly competitive.  Brands and locations are paramount.  But maximize the value of the $20k in such a way that they have a successful 3 year run in the clothing industry if they place the “store” in San Diego. Whether they heeded my advice, who knows? But the best of luck for them.

 

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About Juan Ramón Zarco, SVVGP 胡安•雷蒙•扎尔科

Juan Ramon Zarco, 胡安•雷蒙•扎尔科, Silicon Valley Ventures Growth Partners llp, Hygieia Healthcare Technologies Company, AllRest Technologies LLC, Crimson Growth Partners LLP, jrzarco2001@yahoo.com, is an experienced as CxO, General Counsel and Secretary to public and private companies with global operations. Established track record of producing practical, revenue-focused solutions. As Counselor and Secretary, demonstrating vision, integrity, and sound business judgment, to CxOs. Managed complex, strategic transactions, M&A, contracts support, PE Financing, IPO, SEC compliance, Corporate/HR governance, IP licensing, Budgeting, Staff, outside counsel management, International market access strategies, Domestic & foreign government relations and advocacy. Creative in designing and implementing market access strategies. Practices law beyond conventional model with low-overhead and project-based fees. Effective at managing departments, formulating marketing strategies, balancing budgets, and implementing cost-saving measures. Extensive in-house and private practice experience, advising clients on commercial, corporate, international business, and technology law and policy. http://www.docstoc.com/video/89135472/make-your-business-an-international-presence; http://www.youtube.com/watch?v=fx5gijf3yoc For Sprint, he managed iDen international development in Southeast Asia, Middle East, and Africa, and contractual issues with Verizon. In Private Equity, he worked with Pegasus in vetting international investment deals and interim President for portfolio companies, such as Data Foundation, a data storage company, handling marketing, strategy, fund raising, and accounting. Before Pegasus, Mr. Zarco, as CLO and V.P. of Corporate Development, played a principal role in the structuring, international expansions for 2 telecom companies, U.S. Cable Group and Viatel, Inc. in financing and M&A deals exceeding $200 million. Mr. Zarco earned a J.D. from NYU Law School, M.B.A. from Cornell, and B.A. from Williams College; is fluent in Spanish, Portuguese, French, and German, with working knowledge of Russian, Arabic and Japanese.
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One Response to How far can I go as a Startup with $20k in funding?

  1. Brad K says:

    Living in San Diego myself, I’ll be the first to tell them that investing $20k into a store wont take them far. If they’re going to offer a physical product and have seriously limited funds then selling online and, initially, directly to customers would be the only way to go. The bulk of their funds should go to marketing, in my opinion,

    These are exactly the questions I’ve been mulling over lately involving: physical product, limited funds, centered in San Diego. By going online you automatically remove the geographical limitations and you have none of the fixed costs of a having a store. Of course, some products do better with foot traffic though you’ll need to pay a premium for these locations.

    If I could be so bold as to make a request, I’d be extremely interested if you could one day provide an article on product certification. Specifically how to find out if some type of certs are required before I can offer my product to the public.

    Thanks again. Great article.
    -Brad K

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