Build Your Dream Fund for Your Next Big Idea
May 11, 2012
If you think you’ll never have a million dollar idea, watch Shark Tank on Friday nights and you might change your mind. I think I relate the most to the parents of little kids who come up with cool business ideas inspired by their children.
On Shark Tank, current or aspiring entrepreneurs present their products to a panel of investors (the Sharks) and ask for money in exchange for a stake in the product.
Show Me the Money
One of the questions the Sharks always ask the entrepreneurs is how much cash they’ve invested into the venture. I’m impressed by how many people have already invested $50K, $100K, or $200K of their own money into their idea. It takes courage to take that kind of risk with your money and some of the people are barely scraping by in order to fund their business.
To me, this illustrates the importance of building up a “just-in-case” fund to cover unforeseen events that might develop in the future. For many of us those unexpected costs come in the form of some accident or misfortune and we spend our “just-in-case” fund to cover some kind of emergency. However, there’s nothing to say that your unexpected need couldn’t come in the form of some amazing business idea.
Money When You Need It
For example, there have been several cases of mothers on the show who were doing simple things with their kids and had a flash of inspiration that led to a successful product. As simple as taking their kids to the pool or having a Friday night nail party with their daughters.
Having the money to turn a Eureka moment into a prototype can be the difference between having a great idea that gathers dust in your brain vs creating something cool that helps people and makes your family a lot of money. You might not be planning on becoming an entrepreneur but if the opportunity arises having some funding to get you started will help you gain momentum.
You can always look for investors but most people are going to want something more tangible than just an idea before they’ll hand over their money – and it costs you money to prototype and test to create something tangible.
Finding the Money
There are obviously multiple ways to raise money and entrepreneurs have used them all – take out a mortgage on your home, raid your retirement account, sell your soul to your in-laws for startup capital, sell your house and move into your car, etc.
It’s cool that tools like Kickstarter or Lending Club make it easier these days to get some seed money and launch your idea but not every loan or project gets funded. It’s even more unlikely that you’ll get an opportunity like getting the exposure and the chance to pitch big investors on Shark Tank.
Shelly Ehler, one mom who found success on the show was one of only 52 entrepreneurs who were selected out of 24,000 to make a pitch on Shark Tank – not great odds.
I’m guessing Ehler probably didn’t have a big fund to dip into to start her business since her family was going through tough economic times. I imagine the deal she made with QVC pro Lori Greiner to fund and advise her business was amazing, but not everyone can land a deal like that.
On her blog, Ehler shares one story of how she promoted her product before Shark Tank. She traveled from her home in California to New Orleans to show as a vendor at the World Waterpark Association’s Annual Trade show. Trips like that are great for getting the word out about your vision but obviously they cost money (airfare, hotel, vendor fees, presentation materials, prototypes, etc).
What I’m getting at here is that there are ways to raise money to get your idea off the ground, but you’d have more momentum if you already had a fund established you could dip into.
Your Dream Fund
I know it’s hard enough sometimes just to pay the bills, let alone put away money for things like college or your retirement account. Most of us can’t really afford to have a “in-case-I-have-a-big-idea-someday” fund but what about starting a “dream fund”? Maybe you’ll never have a killer idea and you’ll just end up using your fund someday in retirement to buy a Harley or take a cooking tour of France. Or maybe you’ll fund a great idea and make enough money to retire early….
To give you a little context, this isn’t just an idea that I’m suggesting. The money I’ve made from Money Smart Life since I’ve started the site has gone into my dream fund (after paying taxes of course, blech). I have plans and projects in the works, all made possible by my dream fund. You’ll never see me on Shark Tank because my ideas so far have a different slant than what those investors are looking for, but if you’d like to be in that position someday you should consider starting your own dream fund.
What kind of product would you pitch if you were on Shark Tank?
All posts by Ben Edwards