Funding your business
In the seventh episode of the Startup Series, CEO and founder of Grind & Co, David Abrahamovitch gives us his thoughts on the best way to raise capital for a new business.
Back your idea with your own cash, hire the right people and create a business idea that’s different from the rest. These are just a few tips for growing and funding your business from David Abrahamovitch of London cafe-bar chain Grind.
One of the most common questions David gets asked by small business owners is how to go about finding funding and investors. Today, there is a wider range of funding options available to small business owners than ever before - from using your own savings, to startup loans, grants, equity crowdfunding platforms such as Crowdcube and Seedrs and peer-to-peer lending initiatives such as Funding Circle.
Before approaching external investors, David believes new business owners should demonstrate confidence in their business idea by using their own funds to get their startup off the ground.
Read on for David’s advice on funding your business:
1. Back your business idea with your own money
“You need to fund the first bit yourself whatever that might be,” says David. “It’s very difficult to ask someone to give you money just on an idea. Scrape together your own money, which is what we did with credit cards, loans and savings. If you don’t back your idea enough to put your own money where your mouth is, you can’t expect someone else to do that for you.”
2. Create an investment case for your business
David says startup owners should think about how they can make their business attractive to investors as early as possible. Ensure you are clear on which unique challenges or problems your business solves and who your customer is.
To help build a persuasive case for investment, David advises business owners to ask themselves the following questions:
- Why is this business compelling?
- How is it differentiated from other businesses?
- What is going to excite an investor?
- Who is on your team?
3. It's not about you, it's about your team
Investors aren’t just interested in the business owner, they’ll want to know about the people who will be carrying out day-to-day decisions too. David says owners shouldn’t overlook the importance of their team’s capabilities when building a case for investment. “I’ve done venture capital funding from my previous tech business, private funding from angel investors and high net worth individuals and crowdfunding,” he explains. “The thing that all of those things have in common is that they will be obsessed, quite rightly, with who is in your team.”
“You can spend all day writing a business plan but no business goes according to plan. What matters is who you’ve got involved and how they’re going to react to the different challenges that every business faces as it grows.”
4. Keep looking for funding opportunities
It takes perseverance and persistence to build a business, as well as taking a realistic view of the costs you are likely to incur and the timeframe for delivery. “We were so naive when we first started” laughs David. “We thought we could get this thing open in a month for £50,000. It took us nine months and three times that. Every 10 minutes, it felt like we ran out of money.”
5. Don't give up
Creating the first Grind cafe-bar took far more in terms of money, time and stress than David had anticipated, but giving up was never an option: “Either you stop and walk away and all that money is gone, or you find a way to see it through to the end.”
“The reality is that we had the building, we were paying rent, we had to get on with it. Sometimes maybe a baptism of fire is maybe not the worst thing in the world but it’s a fairly risky way of starting things and not the most relaxing!”
“Is that the best way to start? I don’t know. It might have been nicer if we’d known how much it was going to cost and we spent time getting together all of the money.”
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