The challenges of self-funding a start-up

Rohini Gupta at FinregE describes the highs and lows of running a self-funded start-up

Acquiring start-up funding can be intimidating and challenging. Having the right connections, making an investment proposition, and executing it can seem overwhelming. It’s not surprising that research shows that 57% of start-ups are funded by personal savings and credit, with 38% of start-ups being funded by friends and family of entrepreneurs.

Self-funding is undeniably the fastest way to get the ball rolling, but it has drawbacks. So, how do self-funded businesses secure funding? What challenges do self-funded start-ups face?

Know when to ask for investment

So far, you’ve been self-funded, but you’ll likely need additional money. If you have never run a business, it’s hard to know when to take that step or how much money you need.

The different types of funding are:

• Seed funding - the first outside money your business receives. Most companies use it to design, test and establish their ideas. You can only make this progress if you have a solid business plan, a product that works, and proof that people are buying it.
• Series A - finance is further cash for fledgling firms
• Series B - funding comes when a company generates sales income. Investors can evaluate the brand’s performance and if the investment is worthwhile.

Adopt an appropriate budget

Regardless of where the funding comes from, knowing what to do with it is tough when you are just starting. It can feel like it’s never enough for the endless ways to spend money, and if you’re self-funded, your budget will probably be tighter than others.

Be prepared for decision overload. Where should funding be directed when it comes to hiring? Salespeople? Marketing and PR expertise? Or a product development team? Or expansion to other markets - local or overseas?

Without enough money, it’s challenging to hire and build a workforce. As captain of the ship, it falls on you to fill any gaps, which is mentally, physically, and emotionally exhausting.

Understand the value of tech investments

Technology is a crucial aspect of practically every job. But technology is costly. From basic PCs to complicated software; your systems must be compliant. It’s challenging to discover effective products within a limited budget.

Choose scalable, multipurpose items to save time and money and stretch your funding. Don’t neglect infrastructure. Optimising your infrastructure can save you 40%–50%. Ensure your algorithms are practical and efficient. This step improves product performance and reduces costs. Using Cloud solutions can help to reduce infrastructure costs.

Gain marketing and customer behaviour insights

When I started my brand, sales, marketing, and public relations were low priorities. It’s hard to justify spending money on these things if you already have some customers.

The importance of marketing cannot be overstated. A good website with relevant keywords and appealing content will help you develop engagement with a larger consumer audience. And more customers will help your business to grow.

To get the most out of your marketing budget, use some of it to get to know your target audience before you put a plan into action. Your marketing efforts will be ineffective if you don’t understand how your target market buys.

Try to answer these questions: What is the customer’s buying cycle? Do they buy from a brand they know? Price-shop? What should your product do? What will it take to earn customer loyalty? If you answer these questions, you’ll know if and how to invest in sales and marketing.

The role of networking

Networking is essential when starting out in business. I’ve learned that by only putting myself out there is when I have a chance to win or gain valuable customer knowledge, even if facing rejection. Whenever I meet a possible investor, a mentor, or a client, I learn something new about my business. These experiences help you pinpoint errors and improve your business.

My advice would be to prepare for challenges. Persevere, be your own cheerleader, and believe in your business, vision, and yourself. Every meeting, work catch-up, and Zoom session is a chance to share your passion for what you are achieving.

Self-advocacy involves seizing opportunities. If you want to collaborate with someone? Contact them yourself. No reply? Keep at it. Those who share your vision will be eager to work with you.

Rohini Gupta is the Director and Lead Regulatory Advisor at FinregE which she founded in 2018. She is the brains behind FinregE’s regulatory interpretation and compliance workflow solutions, which are designed based on her extensive hands-on experience and domain knowledge in regulation and compliance.

Main image courtesy of iStockPhoto.com