If you are looking to start your own business venture, one of the most important things you need to consider is finance. Finance is needed to not only to start the business, but also to keep it afloat during the early stages of its growth.
In order to get insights on how to tackle the issue of finance, we’ve spoken to a number of UK based tech startups who have shared their experiences and advice on how to overcome this challenge.
First up we have advice from Ry Morgan, the co-founder and CEO of Yomp. Yomp provides a health and wellbeing platform that helps to increase productivity, reduce absenteeism and boost employee engagement.
Did you experience any financial difficulties when you first set up the business and how did you overcome them?
Setting up any kind of business involves financial investment - both in terms of getting the product / service off the ground and the opportunity cost of giving up on alternative forms of employment. Typically software companies require large sums of upfront investment, but we structured a great revenue-share deal with a development agency in Scotland, negating the need for large sums of capital. On top of this I obtained a £10,000 personal loan from my bank to keep a roof over my head! Worst case scenario the business failed and I got a “real job” to pay it back.
What is the most important financial lesson have you learned so far?
If I was to launch a business again from scratch, I’d be less “British” about profitability and perhaps raise funding earlier so as to help drive growth as opposed to worry about making payroll each month. Until recently, all of our growth was organic (reinvesting profits into new hires / development) but we’re now at the point where a large investment would allow us to focus on market dominance as opposed to maintaining profitability - i.e. growing much faster than if we were beholden to cash flow restrictions.
What financial advice do you have for new startups?
It’s somewhat a cliché, but the sooner you can generate revenue from real paying customers the better. Not least because it extends your runway, but more importantly because it’s a market validation which shows you’re actually onto a potential market (which saves you wasting your time and helps attract prospective investors).
Next we have expertise from Steve Thair, the co-founder of DevOpsGuys. DevOpsGuys provide application management solutions to help simplify business processes.
Did you experience any financial difficulties when you first set up the business and how did you overcome them?
Despite all the hype around government guarantee schemes the High St Banks are useless when it comes to lending to startups and SME’s, particularly those with less than 2 years of trading history.
What is the most important financial lesson have you learned so far?
Get a good online accounting package e.g. Freeagent so you can track your sales and costs on a daily basis.
What financial advice do you have for new startups?
If you are going to seek Angel, VC equity funding make sure that you’ve got your company to stage where you have a stable pipeline or roadmap so that this distraction of fundraising doesn’t destroy your ability to execute on your vision.
Finally we have insights from Daniel Murray, the co-founder of Grabble. Grabble developed an app that notifies users when the fashion they want drops in price
Did you experience any financial difficulties when you first set up the business and how did you overcome them?
Yes all the time, lawyers are the best way to navigate, as is putting the time in to research and asking people all the time no matter how small or stupid it makes you feel.
What is the most important financial lesson have you learned so far?
The most important financial lesson is raise so much more than you think you need for each goal because there are hundreds of surprise ways to run out of money.
What financial advice do you have for new startups?
Only pay for things you absolutely have to, learn how to be a jack of all trades even if you aren't the best at them, people are quite forgiving and all you need to care about is your business surviving between each funding round, not pride or what anyone else thinks.
We hope that these first hand experiences shared by these startups have given you the insights needed to face the challenge of finance when starting your very own venture.
Author Bio: Nigel Breddy is the Managing Director of Databax. Databax provides hosting and data backup services to businesses of all sizes across the UK.
