As I’ve posted in other threads, if you’re starting a business without the funding you read about with angel investors and silicon valley venture capitalists (which is probably most non-tech businesses and probably 99% most businesses in America), it’s extremely hard to come up with hundreds upon hundreds of thousands in cash to start anything. This is usually my reason that if you have low low debt, maybe it’s better to keep it than to pay it off since hardly anyone is going to give you an easy loan to start a business.
Whether that’s a small franchise business or a taco shop or a dry cleaning operation… anything, once you’ve started a business, you’ll realize that cash flow and capital is king.
Since you need funding and most are major hassles, slow, etc…tapping home equity and 401ks are a no brainer. Not to mention the interest rate is tons lower. A lot of people also tap credit cards and balance transfers which I believe the google execs did as well. Here’s an article and quote… http://www.entrepreneur.com/article/197848
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Reluctant to leave their studies, the duo ran the operation out of their dorm rooms. But by mid-1998, Google was getting 10,000 searches a day; so, finally convinced, they maxed out $15,000 worth of credit cards to purchase a terabyte of disk space and drafted a business plan.
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Having done the 401(k) loan route before as well as credit cards, it’s definitely an EASY way to get fast funding.
Obviously, if someone is nice enough (or stupid) enough to invest 50-500k, most of us would go that route since it’s much better to use other people’s money than your own to get rich (the GoPro founder loss like 4 million of other people’s money during the Internet crash). I think I read it was 4 mil…
“After school he founded a marketing company called funBug but after it did not succeed, in 2002 at the age of 26, he decided to travel around the world surfing.”
“Woodman and his future wife Jill financed the business by selling shell necklaces they bought in Bali (for $1.90) from their car along the California coast (for $60)[8] combined with $35,000 borrowed from his mother[7][8] and $200,000 borrowed from his father.”
Nick’s father is wealthy living in Atherton I believe and he had the option to take time off to just “Surf”…
Anyways, most of us don’t have a daddy who can give us a loan for 200k+ to start a business.
One of the “problems” and inequality in America…where if you aren’t well connected, good luck trying to succeed in making it big.
As a worker bee who used to max his 401k and believed the whole never touch retirement assets, home equity, etc…sometimes, you just don’t have the choice if you want to start a business.
Once you do, you’d understand that there are worst things than raiding the retirement account I suppose…
