My 5 Keys To Successfully Funding Your Startup

It seems as though Brexit speculation will never end, for start-ups in particular, there is still a lot of uncertainty and it is important that entrepreneurs arm themselves with enough information to face whatever may come from the current political climate.

There have been some high profile investments in the news which are showing the continued strength of the UK’s tech hub status, such as Entrepreneur First – an accelerator business which has successfully funded 75 start-ups, with a further three investment deals signed since the EU Referendum result. WeSwap, the peer-to-peer travel money start-up has raised $6.5m, showing no signs of letting the referendum slow them down.

The Telegraph reported that European investors have not been put off by the referendum results, still aware of the benefits of investing in start-ups within the UK’s tech-hub. The wealth of education opportunities, tax benefits and the large English-speaking market are still huge benefits in the business world and the country’s politics do not seem to have impacted on the great reputation we have.

The drop in the value of the pound has given foreign investors and opportunity to invest in the companies which were previously too expensive to assist. No-one is sure how long the dip in value will last, but at least there is a silver-lining for start-ups in that foreign investors still know that UK start-ups are strong seeds and worth investing in, especially now that a window of opportunity is present.

However, while attracting investment is import if you’re looking to rapidly grow your businesses, there are a number of reasons why self-funding (or “bootstrapping”) is actually a better way for a start-up to grow.

Is It Absolutely Necessary?

My perspective on funding is that there are clearly benefits to have a bank full of cash. You can hire the right people, you can get the office where you want it to be (geographically and operationally). However, there is a beauty, and a certain clarity, in starting with nothing.

There is a saying: “the only thing scarier than a man with everything to lose, is one with nothing to lose”. I found that starting a business with no money taught me how to be frugal and go without certain expensive luxuries. It made me think carefully about where we were spending the money, and why. It also meant that we grew our company in line with our financial growth so that we never over committed. We didn’t have finance agreements for IT equipment – not because we didn’t want it – we simply couldn’t have it! So everything was bought and paid for up front. This meant that we retained ownership and therefore control in the direction of the company.

Another thing to keep in mind is that if you do have investors in place they will often look to put clauses in place where they can take control of the company if targets are not met. This combined with the fact that it’s more than common to be over optimistic when presenting projected figures to an investor put the founding team in a tricky spot.

 

My 5 Keys To Investment Success

1. Do you really need it?

Think about if you really need money, or if it would just be nice to have more. If there is no real plan as to where the ‘wanted’ money is going, it can become more of a burden – unspent money will prove to investors that you didn’t need the amount you asked for and will show bad planning skills, whilst money which is spent unnecessarily will cause problems further down the line.

 

2. Look for the Right Partners.

Investors who understand the realistic growth of the company are more valuable than those who are willing to throw money around without asking about goals. Investors should be partners and it is important for them to care about the growth of your business – and in order to care, they need to know what to expect. This applies the other way, too. If your investors grant money without fully understanding what they will be getting in return, you may find yourself in a situation where investors expect more than you can provide – or something completely different.

 

3. Don’t make ‘getting funded’ a goal unto itself.

Getting funding gives you the opportunity to started on your journey with a better chance of success. But it doesn’t mean that success is guaranteed. Try to avoid making funding into a big goal, it is merely an early step toward other business-oriented goals.

 

4. Treat the money as your own.

Bearing in mind that money spent will impact the business valuation. E.g. If you forecast that your valuation will be 8 times profit, then every single pound spent unnecessarily is £8 less for your valuation!

 

5. Be transparent.

I think that it’s good to keep your team in the loop about the company objectives including financial ones. So let them know what money is in the bank and when it runs out. You will find a few sense of team spirit is created when people know that there isn’t an everlasting pot of cash. However, the fact that the business has procured finance can boost work ethic and morale.

 

These are my top 5 tips and they worked for me; maybe you have a different take on them, or maybe you’ve taken a different route to financing your startup? I’d like to know more: DM me on Twitter: @bradindigital or leave a comment below and I’ll get back to you.

 

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How Funding Works

I came across this great infographic on the Funders and Founders website that neatly explains the funding process, and the roles of the key protagonists, from startup to sale:

how-funding-works-infographic

 

 

 

The five scariest things about being an Entrepreneur

So, you’ve had ‘the big idea’. You have dedicated a large portion of your life to your new-found goals, and by now may have even received some investment to boot. To an outsider, you’re living the life of Riley – you’ve made it, you’re laughing all the way to the bank, etc, etc. Right? Wrong!

Being an entrepreneur in any business sector comes with huge risks, and these don’t just disappear once your business gets going. If anything, these risks are magnified and multiplied as the new venture gains momentum.

I want to share with you my five biggest fears while on the road to a successful business; you may relate to some or all of them:

1. Running out of cash

By far the scariest thing I can remember is running (and I mean completely running) out of cash. I was lucky enough never to have to inform the staff that they would not be getting paid, but I came extremely close on a few occasions. One moment that, will stay with me forever was having only an hour (ONE HOUR!) to spare before payroll and being saved at the eleventh hour by some clients, fortunately, making payment. Bullet dodged, for that month at least. But I still felt like I was teetering on a knife edge from time to time. Certainly my biggest learning curve as a business owner was cash-flow – on the whole it is never as good as you think it is.

2. Hiring staff

Hiring an employee is really scary stuff! No matter how many interviews, evaluations and assessments you do, realistically you won’t know if someone is a ‘good fit’ for around six months. I have had employees who had a tough start but ended up being rock stars, invaluable assets to the company. Conversely, I have had new starters who arrived as rock stars (by mine or their own perception) who ended up departing on somewhat bad terms after disastrous mismatching of personality, required roles and work ethic.

3. Firing staff

Hiring? Scary. Firing? Even scarier! Unless you are an inherently unkind person (a few choice words spring to mind), you are unlikely to enjoy telling someone they no longer have a job. However, in some cases it is unavoidable. To deal with these situations with the best possible balance between fact and tact is key. This fact/tact balance enables you to clearly communicate all the tangible barriers to them, continuing to work for you while remaining professional and civil.

Avoiding removing problematic staff simply because it is scary can have a negative effect on the staff you DO want to retain. In many cases, the remaining staff appreciate that people who are not contributing to the team effort are removed.

4. Getting outflanked

I remember vividly the day when I was told that one of my competitors had been purchased by none other than Google (you may have heard of them). It truly was an “oh sh*t” moment. If you are a startup and are bootstrapping your business, the last thing you want is to be pitched against a competitor who has unlimited cash and influence. In this instance, the acquisition actually worked in our favour, as Google decided to ‘Sunset’ the product that was in direct competition with ours, (this means they ultimately had the product ‘disappear’). Fist pump moment!

5. Going on holiday

I remember in the early days, I would dread going on holiday. It was the furthest thing from the relaxing retreat it was designed to be. It felt like losing my phone – but a billion times worse. I was cut off from the world and would not be able to deal with a potential crisis, should one happen.

I have experienced enough real and imagined crises to tell you it’s no fun being unable to firefight and manage the situation. That said, there comes a point when things become more structured, the mechanics of the business become more predictable day to day, you have trusted senior staff who can handle even fairly major hiccups, and you can confidently go on holiday and switch off your phone! When this day arrives, you may just be ready to sell your business, as you may no longer be needed!
No owner of that coveted title ‘self-made success’ will tell you that the road to their success was smooth. They will tell you it was fraught with hairpin bends, steep downward turns, surprise junctions and an often overwhelming feeling of fear! The key is to embrace that fear and use it as part of the driving force and momentum behind the growth of your business.

My Top 5 Books

Title: How to Get Rich

Author: Felix Dennis

Where to buy: http://www.amazon.co.uk/dp/009192166X

Plot: Felix writes how anyone can become rich quick, as long as they are motivated, apply themselves and have reasonable intelligence. Felix uses his own wisdom, looking at both failures and triumphs within business to see a step by step creation of wealth. Amazon describes the book as ‘part manual, part memoir, part primer, this book is a template for those who are willing to stare down failure and transform their lives’.

Opinion: Anyone that knows me will know that this is my all time favourite book. I wish I could have met Felix to tell him what an inspiration he was to me. I would highly recommend this book to any entrepreneur who is just starting out, or someone that needs that extra bit of motivation!

Title: The Prophet

Author: Kahlil Gibran

Where to buy: http://www.amazon.co.uk/The-Prophet-Kahlil-Gibran/dp/9562910318

Plot: A story of a prophet who walks the sands, hoping to offer something to the people he meets along the way, but has nothing in possession. The people he meets ask him questions, he shares his wisdom, which ultimately is his gift. Read by millions already, this is a book that will inspire you on multiple topics.

Opinion: If you’re unsure on this one, there’s a sample audio of the book underneath the picture in the where to buy link. It is different to my other recommended books as this is more of a story. However, it is equally as good, and you can take what you want away from it, rather than just understanding someone else’s view.

Title: How to Win Friends and Influence People

Author: Dale Carnegie

Where to buy: http://www.amazon.co.uk/How-Win-Friends-Influence-People/dp/0091906814

Plot: The book gives advice on how to make friends quickly, increase your popularity, persuade people to follow your thinking, enable you to win over new clients and customers, become a better speaker and boost enthusiasm among your colleagues.

Opinion: I would highly recommend reading if you need a boost in confidence, with over 16 million copies of the book sold to, the techniques and practical advice given really will help improve your interactions with all of your relationships whether work or personal.

Title: Awaken the Giant Within

Author: Anthony (Tony) Robbins

Where to buy: http://www.amazon.com/Awaken-Giant-Within-Immediate-Emotional/dp/0671791540

Plot: The books tagline: ‘How to Take Immediate Control of Your Mental, Emotional, Physical and Financial Destiny!’ gives us an insight straight away into the books plot. Anthony describes his most effective strategies and techniques for mastering your emotions, your body, your relationships, your finances, and your life. Formatted into a step by step guide, this book can be classed as a self-learning manual, where readers can take control of their own lives.

Opinion: A book that is equally as good as giving advice as any of the others. Anthony is also famous for his series of other books, where he uses the same themes to describe how to make yourself as successful as you can be, he is a real inspiration.

Title: Same Game New Rules

Author: Bill Caskey

Where to buy: http://www.amazon.com/Same-Game-Rules-Bill-Caskey/dp/0975851047

Plot: More on a sales role view but still great for any entrepreneur to read. In the book, Bill describes how  ‘You must be part marketer, part relationship developer, part closer, and part CEO’. The aim of the book is to help you build a strategy, which will ultimately translate your business value in your respected marketplace.

Opinion: I’ve put the audio CD in the where to buy above, just because I’ve really enjoyed listening to Bill on long car journeys and before I go to bed. Sometimes when I don’t feel like reading it’s good to know I can still get through the book in other ways. It’s a really interesting story, and I would recommend it as a read! Added bonus is that it is read by Bill too, so feels that little bit more personal.