11 Startup CEOs Give Their Best Financial Advice for Early-stage Startups
While having an innovative product and a motivated team are important factors in any entrepreneurial endeavor, there’s nothing more crucial to the success of an early-stage startup than properly managing finances and securing funding. Depending on the specific vision for their company, startup CEOs are choosing to go about this in a number of different ways.
An increasing number of entrepreneurs are choosing to bootstrap, turning their homes into workspaces and hunkering down for a long, often painful – but sometimes blissfully rewarding – foray into starting their own business. Others attempt to secure outside funding early-on, and are faced with the dilemma of quick growth but having to give up equity and partial control of their company.
Another significant trend that is taking place is the democratization of the funding process. Instead of a few thousand VC’s around the world deciding on which companies get funding, global individual investors will gather together to invest in startups, letting the ‘wisdom of the crowd’, decidewhichideas get funded.
We spoke to a number of different startup CEOs to see what their best financial advice is for early-stage startups, here’s what they had to say.
1. Don’t Run Out of Cash
Don’t run out of cash. Get to profitability as soon as you can.
Dan Daugherty, Remotely
2. Bootstrap As Long As You Can
Don’t raise money until you have to. Bootstrap as best you can. Period.
Paul Ruderman, Updatezen
3. Stick to Your Financial Model
Don’t spend a lot. Build a financial model and measure yourself against it every two weeks. Personally, I write down every decision that costs more than $1,000 and explain why I did it.
Preet Anand, Bluelight
4. Raise Capital with Momentum
Raise capital with momentum. Easier said then done, but often early-stage startups raise too early or too late. Identify the key goal(s) that need to be proven to show traction at your given stage, as soon as those are hit, or on pace to being hit, and get out there and raise. Without traction, few will be interested and valuations will be low. Waiting beyond key milestones often isn’t worth the added risk and stress it puts on the business, and also delays the company from putting capital to work while momentum is high.
Brandon Evans, Flic
5. Act Like Its Your Own Money
Consider every single dollar spent as your own money. As long as the business is bootstrapped, this specific issue doesn’t really exist, but as soon as founders bring in outside capital through angel/seed rounds, many tend to forget the value of maximizing the effectiveness of every expense. This in return results in higher burn rate, and shorter runway to achieve set milestones before the next round or revenue level. Since the beginning of AskforTask, we have raised over half a million in outside equity and to this day, we ensure that we negotiate the best deal.
Muneeb Mushtaq, AskforTask
6. Hold Off On VC Financing
Don’t go for VC financing right away, at least until the startup is breaking even financially. It might be a good idea to finance your operations by funding from people around you, who know you, and whom you can trust. When you are in a professional situation, where you can negotiate a great deal from VCs, then by all means go for it.
Khuram Jehanzeb, Veelist
7. Lean Startup Methodology
Adopt the Lean Startup methodology, using the MVP (minimum viable product) approach while developing your product efficiently in order to get to the monetization stage quicker.
Ian Naylor, AppInstitute
8. Don’t Borrow Money
Do not borrow money. Do whatever you can to start with equity. Equity gives you flexibility. That is why you should do your best to prepare “the perfect business plan”. By business plan I mean financial projections and game plan, do not write pages of BP which will probably never be read. Try to raise capital with your plan, if it does not work, apply for state incentives in your country.
John Kagit Socialeyes
9. Stay Grounded
Don’t spend more than you have. Focus your budgetary constraints on revenue driving initiatives. The road is long, so stay grounded after your first success, nothing happens overnight.
Mendel Senf, Yieldr
10. Plan in Advance
Forecast a scenario which is several months in advance. Using forecasting allows a business to understand the return on investment needed over a period of time, and to also gain clarity on worse case scenarios and plan accordingly. Investment is clearly an important factor in growing a business, but the future is an unknown quantity. By understanding worst case vs best case, you are able to steer the business accordingly.
Robert Sturt, Network Union