Deborah Simpson had a good idea from the start as to how much
money she'd need to launch Santa Clara, California-based
MetaSound Systems Inc. in 1996. MetaSound makes cutomized software
that programs and plays music and messages for callers on hold.
The former corporate consultant knew she'd need at least $1
million to finance research and development expenses. However, she
had to settle for only $300,000 of angel financing—an amount
that barely got her out of the starting gate. Six months later, the
money was gone and she was forced to raise an additional $1.3
million through angel financing.
Simpson, 41, was prepared to give away up to 90 percent of
ownership in her company to secure big returns. But soon she, too,
discovered she needed far more capital than she had originally
estimated. While the amount surpassed that of most
start-ups—software development requires large amounts of
capital—the lessons she learned could be applied to all
fledgling companies.
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No matter how much time you spend estimating start-up costs,
Simpson urges entrepreneurs not to follow them like gospel.
"Take what you think you'll need and multiply it by
10," she says. "The more you have, the faster you can
build the foundation of your company."
Simpson also recommends raising money—even when you think
you don't need it. This strategy has certainly worked for her:
Last year, MetaSound's sales hit $500,000; she expects
they'll jump to $2 million this year.
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