Four Reasons Raising Funds Isn’t Necessary To Create Your Company
Growing your startup into the large-scale, profitable business of your dreams takes resilience, creativity, a great deal of planning and capital. Innovative, hard-working and imaginative by nature, there is only one thing many entrepreneurs are lacking: funding.
However, fear not—fundraising, although needed in some cases and with its own benefits, does not have to be a given. Each business has its own individual needs and there is no one-size-fits-all when it comes to financial solutions; it’s important to consider all options in order to find the best one for you. So, is funding necessary in today’s start-up society?
1. Fundraising: A Need or an Ego Boost?
The rise of social media has had multiple positive impacts on businesses and the way we’re building them: valuable communication avenues, a better understanding of customer needs, more opportunities for growth and increased visibility of fundraising. For some, this visibility and easier access to funding have been necessary for their businesses to grow and thrive.
There is the positive power of social media, and there is nothing wrong with a “humble brag” (or outright brag) every now and then; it can be a great marketing tool and your customers should be aware of your successes. Bragging culture and “boast posts” on all social media platforms are widespread phenomena, and there is no exception when it comes to funding rounds.
So, as we live our lives online, fundraising has become a public event and a way to measure success. Many entrepreneurs and investors place significance and focus on the size of the funding round, rather than on the actual use of funds and the individual needs of their businesses. Other businesses see these posts and compare themselves to these seemingly “successful” businesses. In turn, this can lead to making choices that can have a negative impact on businesses and a false sense that raised venture funding equals a successful business.
To clarify, although it’s commendable to have investors believe in your idea and potential, it’s equally commendable to fund your business on your own. Funding is an important aspect of any business, but it is important to remember that it should be used to fuel growth, not to create a sense of prestige or boost the ego.
2. Take Control And Reduce Pressure
As well as increasing capital, raising funds means bringing outside investors into your business. These investors can bring knowledge, faster growth and network connections, but they can also bring demands and disputes over the direction of your business. Generally, the higher stake an investor has in your company, the more power they have to assert their control over the decision-making and direction.
Therefore, not taking on investors places control, decision making and overall direction of the business entirely with you. You are free to focus on the things most important to you, structure your own work environment and create your own vision and goals. We all want our businesses to succeed and strive to make profits with or without investors, though the reduced pressure of not bringing in investors has major benefits. Without investors, you are unburdened by the pressure of making short-term profits and are free to focus on the long-term goals of your business. In the case that your only option is to raise funds, consider taking on several smaller investors or a silent partner in order to keep control.
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3. Maximize Profits
Maximizing profits is important for any successful business and there are many ways we can do this: invest in the right team, increase efficiency and productivity and reduce costs. The latter is where not having investors can be beneficial. Without investors, there is no requirement to share the profit. All financial gains can be in your control and can be put directly back into your business.
Early on, most businesses do not generate the revenue projected and this can lead to a cycle of fundraising and diluting shares in your company. Raising a round just to reach profitability is a common thought process, but often we’ll increase our expenses to match the money we have, leading to the need for even more funding and even more diluted shares.
4. Easier Than Ever Before
Starting your own business is easier than ever before and we have the technology, the internet and most surprisingly, the pandemic to thank. Entrepreneurs have an abundance of tools and resources at their disposal to help get businesses off the ground without the need for large amounts of capital. Let’s look at a few ways to do this.
1. Use websites and social media to attract customers, receive customer feedback, build a brand and increase your market reach globally, with little to no funding.
2. Take advantage of freelancing platforms, such as Fiverr and Upwork, to recruit high-quality candidates at lower costs. With more people working remotely since the pandemic, there are many skilled and affordable freelancers available and willing to support your business needs.
3. Use automation such as Notion or Zapier to provide a space for you and your team to work together, stay organized and save time.
4. The pandemic saw many of us working from home and we’ve since seen many make the decision to keep things that way. Without the need for an office, you can reduce overheads and recruit globally.
Finally, the financial choices made when starting out will likely be some of the most important business decisions you will make; they can affect the day-to-day running and shape the infrastructure and future of your business. We all have different ideas of what success looks like and will realize our goals in different ways. Consider this: What does ideal look like to you? What does success look like to you? For some, fundraising will be the best option for their business, whereas it may not make sense for others. There is no right or wrong path to take, but make sure you consider all avenues and long-term outcomes before making a final decision.
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