When starting a company there are a lot of things that have to be taken into account. The biggest priority among them although is obviously finance. Without funds, everything you plan is just moot. And coming up with those funds is by no means easy. However, there are many ways through which you could find funds for your company. Two of the more common types of funding are investor based funding and self-funding. In this article, we will be exploring the latter and analyze its viability in today’s context.
Without any investors, you are left to rely on only the resources you have especially when it comes to money. So you will have to work without a lot of resources most startups have, especially on the terms of manpower. And in most cases, it’ll just be the founder manning all stations. This is an uphill task that one has to overcome with self-funded companies. But, beyond these seemingly insurmountable odds lie great prospects that are definitely worth the blood, sweat and elbow grease.
Often when it comes to startups there is a certain sense of urgency to get the ball rolling as quickly as possible and start raking in the money. This is more common among self-funded companies. Since self-funding puts, some financial burden on the founders, generating revenue as quickly as possible becomes a priority. This leads to giving up on ideas that are really unique, in the long run, may generate greater revenue, could bring greater recognition to your brand and instead you’ll stick to low risk, quick revenue ideas. So, only ideas that make you money from the get-go make the cut.
Not having relied on investors allows you to make all the decisions yourself. With investors, every new step needs to go through your investors to come to fruition. And if a certain plan is not in their interest, there is a good chance that it will be scrapped. If your company is making a sustainable amount of revenue, you are free to make your own decision without having to indulge the demands of the investors. This is a luxury only a self-funded company can afford.
One of the biggest advantages of owning a self-funded company is that you can scale and grow at your own pace. Of course, assuming you are generating enough revenue. You will want to accomplish certain goals with the resources and the infrastructure you have and won’t worry too much about rushing to expand. This will also help you cement your company’s identity and define what it stands for. With investors growth is subject to your investor’s perception of growth and depending on that you’ll have to start generating more revenue or become a company of a certain size. This can really take control away from you.
An unfortunate downside to self-funding is that there is very little room for failure. Absolute success is your only option and should you lag behind on revenue, you can get into deep trouble. With investors you have a chance to bail out or try to acquire more funds to correct your mistakes and get back on track. With a self funded company not having any bailout money can undo all your efforts.
The idea behind funding is to seek out a successful business and replicate it. Most investors don’t like betting on an uncertainty, especially when it comes to startups. So any idea which is beyond the norm, radical or not, will drive away the investors. So you’ll have to sacrifice ideas that you are passionate about. With a self-funded company, the World is your oyster. You don’t need to limit your ideas based on whether others think they are feasible. This will allow you to pursue your goals and come up with something new and inspiring, at a great personal risk of course.