The best way to start a business is with little or no money


If you think raising capital is the best way to get your business off the ground, you’re wrong, according to Mark Cuban.

You should actually do just the opposite, billionaire entrepreneur said during a panel at SXSW last month, and choose to start a business “with as little money as possible”.

Cuba, of course, has invested in hundreds of startups, including some on ABC’s “Shark Tank.” But these companies often already have momentum and need external funding to achieve a specific goal.

“People have this mindset that, ‘OK, I’m starting a business. Now I gotta go fundraise,'” Cuban said, adding, “Just remember to fundraise, whether it’s from me, on ‘Shark Tank.’ [or] anywhere, it’s a must. There is someone who wants that money back.”

Instead, Cuban recommends using your own personal savings to start any business. That way you “control your own destiny,” he said. “The longer you can retain and control your capital, the greater the potential.”

It’s “where the big bucks are made,” he added.

Cuban started his first business, a computer systems company called MicroSolutions, at his own expense. He sold the startup to CompuServe for $6 million in 1990.

Four years later, Cuban and his friend Todd Wagner invested $10,000 in a small startup called Cameron Audio Networks. Later, sensing the potential, they offered a takeover of the company’s ownership – ultimately assuming a large majority of its equity and turning it into Cuba’s second-largest company,

This company sold to Yahoo! for $5.7 billion in 1999.

“If you look at people with a B next to their name, it’s because they own all the equity in their business,” Cuban said.

A review of the richest people in the world shows this to be at least partially true. Elon Musk, who has an estimated net worth of $187.9 billion, owns about 23% of Tesla and 74% of Twitter, according to Forbes. Jeff Bezos – whose net worth is estimated at $125.1 billion – now owns “just under 10%” of Amazon, Forbes reports.

Still, holding onto your company’s equity until you have no other choice is a smart move, Cuban said.

“I’ve sat next to people who have sold businesses for billions of dollars and they’ve done well,” he said. “But they own 2% of the business, when all is said and done.”

Disclosure: CNBC has exclusive off-network cable rights to “Shark Tank,” which features Mark Cuban as a panelist.

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