How to start a company with no external funding7 May, 2015 / Articles
It’s rare for a boardroom scene in The Apprentice to pass without Lord Sugar reminding the contestants how he started with nothing. But that was then … can the same success be replicated in today’s business climate?
Davinia Parker is 10 months into a new venture, Harbourside – an online boutique and wholesaler of affordable, high quality leather handbags which she designs herself. Like many entrepreneurs, Parker’s vision came from a personal interest – she appreciated designer handbags for their quality, but balked at the associated £800+ price tag. Harbourside’s products retail for £60-£120; the leather is imported from Italy and the goods are made in the Far East.
Keen not to be indebted to anyone, Parker has funded the business herself. Working from home, she introduces a new collection each season to avoid over-stocking. With a background in PR, she doesn’t have far to look for promotional expertise; for other services she tries to avoid paying for something if she can find scope for a skills swap.
She seized one such opportunity with a contact she made at a recent retail conference. “She was selling carpet bags but was struggling to get exposure,” Parker says. “I offered to promote her products as a guest label on my website, which already had good traction. She achieved more sales without the cost of having to host her own website or use pay-per-click advertising, while I got to broaden my product line without incurring additional risk.”
Another tactic is volunteering to speak at conferences, rather than forking out what might be £1,400+ (plus travel and equipment/artwork) for a small tucked-away stand at an exhibition. Parker has also shunned offers of formal focus groups. “Rather than pay an arbitrary group of people to comment on my stock, I use my existing networks and host my own consumer panels,” she explains.
She doesn’t employ anyone, does the books herself and only seeks professional help for the odd query – such as validating what she’s doing with an accountant employed by someone else in the family.
For Jonathan Meare, founder of jdmdesigns in Poynton, Cheshire, external input has played a more critical role, particularly in helping identify potential grant-funding. Three years ago Meare was a senior buyer in the construction industry. Having taken voluntary redundancy out of fear for the sector’s prospects, he had a eureka moment during a beach holiday and decided to pursue his dream of being an inventor. His product is a simple clip that stops a beach towel blowing away. Today it is stocked in more than 20 countries.
Development company Lucid Group put him on to the North West Development Agency (NWDA) which was offering £300 ‘innovation vouchers’. This helped him get started on development.
The next challenge was getting publicity. Meare joined the Manchester Inventors Group and learned that by blogging and tweeting about the product himself he could reach a decent audience for free.
Further help came from Business Link and UK Trade & Investment (UKTI). The latter provided match-funding through its passport to export scheme which supports home-grown products (the beach towel clip is made entirely in the UK); Meare entered the Australian market in December 2010. But can he pay the mortgage? “I’m doing all right – and my wife works,” he laughs. “I haven’t had to sell a kidney yet.”
The final contender for success on a shoestring is Luke Aikman, founder and chief executive of Loccit.com. Still his twenties and already with one company to his name, he is about to launch a new online platform that blends the premise of a private blog with the collective memories created on sites like Facebook.
“From sleeping under my desk, to contra deals, to providing equity rather than money, I’ve had to do it all,” Aikman says. A self-confessed “nightmare student” at Bristol University six to seven years ago, he introduced himself to the campus’s “head of entrepreneurship”, looking for work to support him as he developed his own inventions. (He was working on a new brand of condom at the time.)
As his ambitions grew, Aikman became creative in preserving resources. He began brokering deals between two groups of people he found himself regularly in contact with: computer science students who would happily offer up their development skills in return for slightly more than they’d get pulling pints and people looking for funds to create new digital or mobile apps. Through his matchmaking endeavours Aikman was able to turn a tidy profit – if only he could lay his hands on it.
“The trouble with a project-based business is the cashflow,” he recalls. With another idea of his own rapidly taking shape, he needed more ready resources. He stopped renting his flat, bought a blow-up mattress and took to sleeping in the university offices, getting up at 5.30am before the cleaners arrived. Discovering that a favourite restaurant had a weak web presence, Aikman volunteered his student team to produce something more professional. He took his cut in the form of three free meals a week, living like this for more than nine months. The resulting company, Nudge Digital, is now self-sufficient.
Although his latest business Loccit.com, was founded in less extreme circumstances, again Aikman downsized to save money, this time swapping a nice apartment for a £230-a-month crash pad in a tower block. He started by employing interns and paying people in equity rather than cash. Within nine months of creating the company he was rewarded for his bootstrapped beginnings, attracting investment from a syndicate of business angels in London.
Reflecting on his experiences, Aikman muses, “Cash is important, but it’s not the be-all and end-all.” But launch quickly, he advises. “Bring out a minimum viable product so you can start building a customer base, get feedback and create a buzz around what you’re doing. It’s competitive getting funding, yes, but for great ideas there’s always money.”
This content is brought to you by Guardian Professional. To receive more like this you can become a member of the Small Business Network here.
We’d love to hear your views and thoughts in the comments but please remember not to disclose personal identifiable details.