“What’s the most you ever lost on a coin toss?”
— Anton Chigurh, No County for Old Men (2007)
There’s a story I heard many times during my days in revenue-based financing. I’d be speaking to a prospect about funding, and after explaining that our minimum revenue requirement was at least $100,000 a year, the prospect would fire back—sometimes politely, sometimes not—with something like, “If I were doing $100,000 a year in revenue, I wouldn’t need you guys!”
If you’ve ever tried to sell a business loan, you’ve heard this before. It’s that Wade from Fargo moment all over again: lenders need to see a track record before they’re willing to take on risk. And if your business doesn’t meet that threshold, it’s like trying to convince Wade to hand over $750,000 with nothing but promises. Banks and lenders are like Wade—they’re not going to put up cash unless they’re seeing solid numbers that give them confidence.
There’s No Agreed-Upon Definition of a Startup
The word “startup” gets tossed around like it means the same thing to everyone, but the reality is, there’s no universal definition. To some people, a startup is any business that’s pre-revenue or has just launched and is still trying to figure things out. But in the world of venture-backed tech companies, there are billion-dollar firms generating hundreds of millions in revenue that are still being called “startups.”
Make sense? Not really.
For our purposes here, let’s cut through the noise. If you’re reading this blog, you’re probably not aiming to be the next Silicon Valley unicorn. You’re looking to grow your small business, not IPO on the NASDAQ. So, let’s define a startup as a company that’s pre-revenue or has minimal operating history and revenue. That’s who we’re talking about here—the businesses that are just getting off the ground but haven’t hit any major revenue milestones yet.
Start Small, Find Product-Market Fit, and Forget About Scaling Fast—For Now
Sure, we all want to grow fast. Who doesn’t want to be the next big thing? But if you’re just starting out, growing fast cannot be your primary objective. Your first goal should be to find out whether people even want to buy what you’re selling—what’s called product-market fit.
Think of it this way: you’re trying to confirm or disconfirm a hypothesis about your business as quickly as possible. Do people actually want this product or service? Will they pay for it? Your job is to find that out, fast, and iterate based on what you learn. Speed isn’t about growing as quickly as possible; it’s about gathering those key learnings, adapting, and figuring out what works.
The good news? You don’t need massive amounts of capital to do that. In fact, you can (and should) start small. The implications for funding a business in this early stage are clear: start small, test, and learn before going all-in.
Here’s what that could look like:
• A food truck, not a full-blown restaurant: You get to test your menu, your pricing, your location strategy—all with far less capital and far less risk.
• Selling your branded product at a farmer’s market instead of trying to scale retail distribution from day one: You can get real customer feedback, refine your product, and adjust your approach before you spend a fortune trying to stock shelves in every store across the country.
• Starting with one great product on Shopify: Why launch a full catalog when you can focus on perfecting one killer product first? Less overhead, less risk, and a chance to truly understand your market before expanding.
The beauty of this approach is that it requires far less money—and we’re talking about sums you might actually be able to raise. Whether through personal savings, a small loan, or even friends and family, you’ll have just enough capital to get the learnings you need to make informed decisions about how to proceed.
Yes, It Might Seem Unfair—But That’s How the System Works
Look, I get it—this might not sound fair. It might feel like yet another way the deck is stacked against people who don’t come from money, don’t have rich relatives, and can’t access huge amounts of capital right off the bat. And guess what? That’s all true. But here’s the thing: a responsible lending system has to operate this way.
Lenders need to protect themselves. They’re not in the business of handing out cash just because you have a great idea. They want to see a track record, a proven ability to generate revenue, and some kind of collateral. That’s how the system works, and there’s no sense in whining about it. Instead, focus on what you can control—start small, test your product, learn from your customers, and prove that your business is worth the investment. Once you do that, the capital will come.
What’s Next? Exploring Startup Funding Options
In Part 3 of this series, we’ll dive into what funding sources might actually be available to startups that don’t have a track record or six-figure revenues. We’ll explore options like personal loans, microloans, grants, and alternative sources of funding that don’t require you to have a massive balance sheet or a family trust fund.
Related Posts
Business Loans for Startups, Part 1: Why Banks Won’t Touch Your Brilliant Idea with a Ten-Foot Pole
Business Loans for Startups, Part 2: Defining a Startup and Why Banks Still Want a Track Record
Business Loans for Startups, Part 3: The Path to Responsible Funding