Startup Funding

How I Funded My Startup by Working for Free

How I Funded My Startup by Working for Free
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For early-stage startups, capital is king: No business can launch without ample time and money. However, as someone who hates the idea of ceding control of my business, raising capital was a personal struggle for me.

Related: No Money to Start a Business? No Problem. Try These 5 Options

So, last January, when I launched my first startup and needed capital to build the business, I decided against outside funding in exchange for equity and took another route: I worked for free.

It was an unconventional path, sure. But it gave me an opportunity to prove my skills, and I was able to convert that unpaid project into a highly-paid and flexible job as a consultant.

It’s not an option that can work for everyone. But the lesson here is that if you have a particular skill, it may have more value than you realize. I only hope that my own story demonstrates that traditional fund-raising isn’t for everyone. There are alternatives, and if you are willing to be a little creative, there are ways to make money yet still have the flexibility to be an entrepreneur.

Here's how you can replicate the risk that paid off for me and helped me launch my business:

1. Create a plan.

My ultimate goal was to land a highly paid consulting position, with minimal hours. This income arrangement would create a great revenue stream and free time to funnel into my business. So I did what any mid-level exec with ten years of experience would do: I looked for the opportunity to work for free.

Okay, that's not the most logical step. But here’s why I did it: The unpaid approach allowed me to get inside a company, see what help they really needed and make a consulting offer they couldn’t refuse. This isn’t going to work for everyone -- you need the right company with the right budget for your particular skill.

But even had my gambit failed, I still would have learned the important startup lesson I did learn: I saw a market, in the form of the company that hired me to work for free, and I answered that market with a product: my skill. Getting them to pay me for the product was one of many times I took a big risk to make that happen.

2. Have nothing to lose.

I do not recommend this process if you need income immediately. The power of any negotiation is the ability to walk away. If you need steady income, this approach is probably not for you.

Related: Are You Ready to Seek Funding? This 10-Point Checklist Will Decide.

3. Come in with a real skill.

In 2014, I ended a ten-year career in branding, which gave me a lot of experience. Experience equals expertise. The genius behind starting with an unpaid project before you pitch a paid engagement lies in your ability to say you're an expert.

Also, because I was willing to work for free, I was able to show the company what I had to offer before they had any skin in the game. That way, once I asked for their monetary support, they already knew what I could do.

If you are hoping to turn working for free into something paid, ensure you have the skills to make a difference -- and then deliver.

4. Find a company seeking expertise.

Identify target companies by researching which businesses are actively hiring for positions related to your expertise. My target company was hiring for a creative director -- perfect for my background. I came in and said, hey, instead of spending a bunch of time and money on the hiring process, how about your letting me do this job for free for a while? How could they pass that up?

5. Make a new friend.

Relationships take time, but an influential reference will provide social validation during the decision-making process. Don’t know someone at the company directly? See if any of your connections on LinkedIn do, and ask for a referral. Having a personal connection speeds up the process. It also gave me the "in" to present my unique offer.

6. Pitch your working for free as a “no-risk” or “win-win" proposition.

When I landed my unpaid gig, the conversation went like this: 

1. You see that Company XYZ needs some help.

2. You have the expertise and free time during the week.

3. You’d like to propose working for free.

I introduced the idea as a no-risk proposition. Then, what happens will be one of two outcomes: 1) The project is a success and turns into something more. Or: 2) It’s not a success, but since you have relevant experience, the company will get value at no cost.

7. Get paid.

About two weeks out from the end of my unpaid project, I pitched my strategy, which included offering the company a rate lower than the monthly salary for a full-time person. My advantage was the confidence I had that I had already identified the company's pain points.

I made myself available whenever they needed me but limited my hours to give myself the flexibility to start my own company. So, if you follow my example, make sure you do your math and your research: You need to work enough to make a difference to the company but give yourself enough flexibility to live your dream.

8. Under-promise, over-deliver, execute like a boss.

While consulting, be 100 percent focused on your client and not your startup. If you’re working only a handful of days a month, you need to make every hour count.

After four months of this arrangement, I had earned $20,000, still owned 100 percent of my business and had a huge amount of time to work on my startup outside of the consulting hours.

Why not just take a full-time job and save up for your startup? Answer: You will never have the time, freedom and flexibility you need. 

No startup is successful when a founder’s time is severely limited. If you’re serious about your startup, you must allocate the major portion of your time to your new venture. So, be creative, be nimble and don’t be afraid of a little (creative) hard work.

Related: The Year in Startup Funding (Infographic)