As a college student, I started a website development company based on what I was learning in my classes and internships. Later, while working for a Fortune 200 company, I used part of my salary to fund a startup I was putting together on the side. When that later became my full-time job, I used some of the money it was generating to start yet another company. Now that that company has been acquired, I’m spending most of my time on growing it while tinkering with some side projects all over again.
It’s one thing to have a side hustle that informs and enhances your career. It’s another to turn those gigs into full-time ventures, then use them to fund new side projects that do the same, over and over again. I call that process “self-incubation,” and it’s a little tricky but far from impossible. Here’s how to nail it.
Despite the hype of venture capital firms and angel investors, most entrepreneurs have to bootstrap (at least at first) in order to prove their business model. By one estimate, some 57% of companies are self-funded, with an average of $48,000 of funding, as compared to the less than 1% of companies that are funded through VCs and angel investors combined.
You may see raising money as a necessary part of the entrepreneurial experience, but it’s only essential if you have a scalable product for which venture capitalists can expect a high return on their investment. But if you bootstrap your startup until it’s profitable, you can gain leverage with investors that you might never have had earlier–potentially leading to a higher valuation and letting you hang onto more equity. In other words, waiting can work in your favor.
The challenge, of course, comes in the waiting. Trying to get a business off the money with very little cash on hand is no easy thing to do. Still, the costs of launching a startup are now much lower than they were even a decade ago, making self-incubation a more attractive and viable option. And with freelance marketplaces like FieldNation, Upwork, Randstad, and Adecco, it’s arguably easier to find flexible talent to fill your company’s needs cheaply–even at the early stages, when it’s little more than your side hustle.
In the meantime, you can use virtually any type of “day job” in order to fund your project, including a full-time position like the one I had when I first started. It’s true that saving money depends on your lifestyle and salary, but even if you manage to set aside a small amount, it’s still a pool of investment money you wouldn’t otherwise have had. It won’t buy you a full-time staff right off the bat (or even come close), but what it does buy you is time. And you’ll need plenty of that to experiment with ideas, all without having to worry about having enough money to live on.
Millennials may even be better cut out for self-incubation than earlier generations of entrepreneurs. 78% of millennials who participated in a recent MTV survey said they believe it’s important to have a side project that could become a different career.
But a side hustle could just turn out to help advance your career even if it doesn’t evolve into a new full-time venture–that doesn’t mean you’ve failed. Your side projects can lead you to new connections, ideas, and job opportunities that you won’t have foreseen at first. And it’s those that can fuel more entrepreneurship, even if you don’t end up transforming your side gig itself into a startup. For instance, a blog I started in 2006 eventually led to me create the first social media position at my full-time job a year later.
Nevertheless, many of those who self-incubate are more passionate about their side projects than their current jobs. Back in 2013, my firm conducted a study of over 3,000 freelance workers and found that 72% of those who were building side projects wanted to ultimately quit their full-time jobs, with 62% hoping to do so within two years.
The process of successfully turning a side gig into a startup involves high calculation, low risk, and plenty of experimentation. While many think entrepreneurship is about quitting your job and hoping your big idea works out, self-incubation is more of a slow-and-steady approach–easier not just to navigate on your own terms, but also to replicate.