Let’s be real, most start-ups need funding. Here are my futile attempts at securing funding. [spoiler alert: cool video right at the end]
Although I had a business plan I found it difficult to forecast cash flow- I had no cooking clue how much any of those line items costs nor did have an idea on how much I could charge for my services. I was (and still am) basically driving blind and figuring things out along the way. Nevertheless, I need to have funds available as and when required. I checked my savings balances and hope that would be enough. As a precaution, I checked with my bank how much overdraft I qualify and also got a quote for a personal loan from another bank- added all that together divide by two (just in case) and this was a budget I needed to operate in. I wasn’t really keen on getting other shareholders as a) I thought I would be able to fund the start-up phase myself and b) I didn’t want to give up control.
One of my colleagues once asked me- “how much runway do you have left”. Luckily, I had come across this term from this series I was watching at the time called “Silicon Valley” that is about tech startup. Runway is essentially how many months left of expense you have left before your funds run out. While I knew how much funds I had, I didn’t know how much startup costs were awaiting me. I wonder how many startups can answer this question in the very early stages?
I guess I was lucky that I had a full time job and my salary could sustain me and I was in no particular rush to launch the website ASAP. On the other hand, this could viewed as a curse in disguise… having a secure job is perhaps the reason why I’ve been taking my own sweet time with Entrihub. Perhaps I would’ve been further had there been a sense of urgency.
As a start-up, some extra funding would help a great deal. And of course, I made it my business to know what funding opportunities exist- literally. I actually wrote an article for Entri titles “A myriad of funding opportunities” where broke down all the different avenues to source funding depending on what stage your business is in.
I remain adamant that I’m not selling part of my equity – if I can avoid it. So VC funding was off the table. Loan financing does not really work for start-ups as there are no cash flows to service any debt. That left grant funding. I was hesitant at first to apply for government funding because the process is typically long and onerous. This was of course not sustainable as I will most likely run out of funds before I reach scale.
Eventually I decided to apply with Technology Innovation Agency (TIA)- I had heard one of their directors speak at the Western Cape Funding Fair in 2016 and had met one of their agents. The application is all online which is great. But the response time was slow (no surprise there). Months later I follow up and eventually they rejected my application.
Great just great. Time and energy wasted. I sulked for all of two seconds but then I had to move on. Seeing that soft launch date kept moving, I had more time to inject some $ from my monthly salary to keep the business afloat.
I’m also hoping *crosses fingers tightly* that I can win a competition or two. It’s basically free money that I can use to grow my business.
A few weeks after TIA rejected my application, they emailed me to say that they referred my application to mLab. I didn’t pay too much attention to this. A few weeks after that, I’m at the airport on my way to Paris, and I get a call from mLab saying that I’ve been shortlisted! Whohoo! BUT I needed to attend an accelerator programme the next week and its automatic disqualification if I don’t attend! Wait what? Next week? I’m not going be in the country then. Isn’t there another one I can attend later? Nope. Isn’t there someone else from your company that can represent you? Nope- I’m a start-up, it’s literally just me. Luckily, the lady (bless her soul) was sympathetic and promised to check with her CEO if they could make an exception for me. And she’ll let me know.
Unfortunately nothing came of this either *sigh*. Oh well, at least someone was remotely interested in my business idea- that’s a good sign, right?
Fast forward a year or so later, I came to point where I realized that I need help. I don’t know what I’m doing, I am going to swallow my pride and ask for assistance in getting my business off the ground. In chatting with my brother in-law, he mentioned that they managed to get a lot of assistance from SEDA. I initially didn’t want to approach them as they are key sponsor of one of my competitors and I didn’t want them to use my ideas. But eventually I decided, what the heck, let me just try it.
The Seda website states that they help small business but it doesn’t really outline exactly what it is they offer and what the processes are. But these are the steps I went through:
- Register as a client on the website. I thought that once I registered, I’ll get more info. Alas I was disappointed.
- Called my closest SEDA branch in Cape Town and they advised me that I’ll have to schedule a 1.5hr meeting with a business advisor. The next available slot was about two weeks from the date I called. This meeting is to find out a little more about you and explain what SEDA does and how they can help (why they can’t just post this on their website I don’t know…)
- At the first meeting, I had to go with a copy of my ID and copy of company registration certificate (if applicable)- there was quite a bit of paperwork to fill out. Again I don’t know why you can’t complete this online and submit before the meeting. I decided to takes a day leave as I couldn’t really escape from work for this 1.5hr meeting + factoring in travel time.
- At the first meeting, they give you “homework” and you have a follow up 1.5hr meeting 2 weeks thereafter. Depending how much business acumen you have, I feel like they can just tell you what they need and you can come prepared to the first meeting with the relevant docs e.g. business plan etc and you can just have one meeting. Oh well, efficiency isn’t really government’s forte.
I think for entrepreneurs with limited business knowledge or who are in the beginning phases of their business and little to no startup capital, SEDA may prove to be useful. They offer mentorship, will explain how financial statements work etc, pay for logo design, set up of basic website, marketing material (like banners, business cards) etc. Their services are not completely free, they require entrepreneurs to contribute about 10% of the assistance they offer. Which is not too bad. The only thing, the process and timing sounds tedious. You can only use their approved vendors, a request for quote needs to go out to them and basically follow government procurement procedures (i.e takes forever). Apparently, one “project” could take around 3 months. They obviously have budgets as well and they’ll only pay up to R5k for marketing (this amount has not changed in over a decade). They are also very much stuck in the past. They don’t allow the budget to go towards social media/online marketing. For me, this is far more effective than a banner that I’m going to put where, especially considering that my business is online?
So for me, I found the assistance very limited and archaic, particularly because I was quite far along with my business (I had a logo and website etc) and I wasn’t going to go through all their red tape just for a banner. Also, as a chartered accountant by profession, I didn’t need help in understanding financial statements etc. So I did not progress discussions with SEDA further than the first meeting.
While getting a big juicy cheque would have been so nice, this would likely have come with strings attached. Sometimes bartering or scoring some freebies could go a long away in saving you some bucks that you otherwise would have spent.
As a startup, I did not really have anything to offer in exchange but I was fortunate that some people offered me their services for free- because they either really believed in my idea or… they felt sorry for me. I choose to believe it is the former!
I managed to leverage my BBBEEE level 1 score to score some free legal services as part of the legal firm’s ESD programme. Also, a very talented animator was staring her side gig and needed a project for her portfolio. The going rate for my 90sec promo video was about R60k and she agreed to do it mahala! I also entered a competition and won access to a 3 month online accelerator programme worth R12000. I entered another competition to win a branding package, but unfortunately I only came in as second princess.
In conclusion- the only way through this is hustle, hustle, hustle.
I created an explainer video for Entrihub on the myriad of funding opportunities for businesses depending on where you are in the life cycle you business is in. Read the full article here