According to Mark Cuban, you are mistaken if you believe that raising money is the greatest approach to launching your company.
In fact, the billionaire businessman advised choosing to launch a company “with as little money as possible” during a panel at SXSW last month.
Of course, Cuban has backed numerous startups, some of which have appeared on ABC’s “Shark Tank.” However, those businesses frequently have momentum already and require outside capital to accomplish a particular objective.
People develop the attitude of, “Okay, I’m beginning a business. I need to go raise money right away.” Just keep in mind that raising money—whether it’s from me, on “Shark Tank,” or anywhere else—is a responsibility. Someone is seeking their money back.
Cuban advises investing your own savings to launch any firm as an alternative. You’re “controlling your own destiny” that way, he continued. “The upside is greater the more equity you can keep and control.”
He noted that’s “where the big bucks are made.”
On his own cash, Cuban founded his first business, a maker of computer systems named MicroSolutions. In 1990, he sold the fledgling company to CompuServe for $6 million.
A little business named Cameron Audio Networks received a $10,000 investment from Cuban and his friend Todd Wagner four years later. Later, seeing an opportunity, they proposed a buyout to the company’s shareholders, eventually taking over the bulk of its equity and transforming it into Cuban’s second company, Broadcast.com.
In 1999, Yahoo! purchased that business for $5.7 billion.
People that have a B next to their name hold all of the equity in their company, according to Cuban.
The richest people in the world demonstrate that this is at least partially true. According to Forbes, Elon Musk, whose estimated net worth is $187.9 billion, owns around 23% of Tesla and 74% of Twitter. According to Forbes, Jeff Bezos, whose estimated net worth is $125.1 billion, currently controls “a little less than 10%” of Amazon.
One of Steve Jobs’ greatest “innovation” strategies is shared by Apple CEO Tim Cook: “One of the things I loved about him” is what it is.
Cuban said that it is still wise to hang onto your company’s equity until you have no other choice.
I’ve sat next to folks who sold businesses for billions of dollars, and they did alright, the man added. But once everything was said and done, they now own 2% of the business.
