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Bit by Bit

Fund your startup with pieces of your finished product.
July 1, 2006
URL: http://www.entrepreneur.com/article/159868

Sell off little pieces of the pie to buy an even bigger pie--that's what Dennis D'Annunzio, 34, and Trammell Hudson, 31, did to fund Rotomotion LLC, their Charleston, South Carolina, startup that designs, manufactures and operates helicopter robots and aerial robotic systems. In 2003, they began developing systems that would make up their main product and realized they could sell these components for other uses. For instance, they developed an Inertial Measurement Center to measure movement of the craft and began selling it to other robotics enthusiasts. Components were sold for prices ranging from $350 to $5,500--a fraction of the cost of their full robotic helicopters, which sell for $15,000 to $60,000. "Each stage helped finance the next stage," says D'Annunzio. With $280,000 of their own money and $700,000 from component revenue, they've been able to launch their main product, and they expect 2006 sales to hit $2.5 million.

To plumb your company's assets, determine what peripheral products or services you may have to offer, and make sure they don't take away from your main product or service offering, says Lea Strickland, CEO of FOCUS Resources, a growth consulting company in Cary, North Carolina. You might offer a different version of your product, license part of your idea, give seminars in your field or offer a product or service to a limited geographic region. Be careful, though, says Strickland, to protect your intellectual property and your brand image-don't put out a substandard product that will hurt your main brand.