Billionaire Mark Cuban: This is the ‘biggest mistake’ people make when starting a business

AUSTIN, TX – MARCH 12: Businessman Mark Cuban speaks onstage at ‘Mark Cuban & Tech Execs: Is Govt Disrupting Disruption?’ during 2017 SXSW Conference and Festivals at Austin Convention Center on March 12, 2017 in Austin, Texas. (Photo by JEALEX Photo/Getty Images for SXSW)

By Tom Huddleston Jr.

A little self-reliance can go a long way for entrepreneurs.

That’s according to tech billionaire Mark Cuban, who told Ryan Seacrest the “biggest mistake” an entrepreneur can make when launching a new business.

“I think the biggest mistake people make is once they have an idea and the goal of starting a business, they think they have to raise money,” Cuban said on Thursday’s episode of Seacrest’s podcast “On Air.”

“And once you raise money, that’s not an accomplishment, that’s an obligation,” because “now, you’re reporting to whoever you raised money from.”

Cuban says entrepreneurs who rely on outside funding can become too beholden to the interests of their investors, who might have a different idea of how to grow the business.

“If you can start on your own … do it by [yourself] without having to go out and raise money,” Cuban tells Seacrest.

Business experts and entrepreneurs often argue the pros and cons of raising outside money to start a business versus self-funding (aka “bootstrapping”), the latter of which can typically involve sinking the founders’ personal savings into a new venture and can result in slower growth if the business is reliant on slowly increasing revenue in order to expand.

While fundraising injects much-needed capital into a nascent startup, taking on outside investors can also bring pressure from those investors to grow the company faster than might be healthy in the long-run in order to create an immediate return on their investment.

In Cuban’s own case, the billionaire owner of the NBA’s Dallas Mavericks started his first business after moving to Dallas with only $60 in his pocket in 1982. Called MicroSolutions, the company was a computer consulting business that he launched with money he and his roommates made throwing keg parties and charging guests $20 apiece for entry.

Cuban, who had recently been fired from a computer software store at that time, marketed his new company to his former clients from his previous job and built it into a successful business that he would eventually sell to CompuServe for $6 million in 1990.

So what’s Cuban’s advice?

“Try to find something that you can make, or that you can buy yourself, and sell to people around you and then ask for referrals and grow the business that way and you can turn it into something enormous,” he tells Seacrest.

This article first appeared on CNBC and is republished with its permission.

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