Every startup starts with a vision. But to make that vision a reality, entrepreneurs need more money than dreams. For this usually many people turn to funding. However, with venture capital (VC) funding at a decade-low in 2023, funding has become even more scarce, especially for companies in their early stages that are harder to secure. Many young companies don't realize that funding isn't the only path to success. In fact, lack of funds can be a company's secret weapon.
In the early stages of building a company from the ground up, a sudden influx of cash can create a false sense of security and influence more risky decisions, some of which may not be sustainable in the long term. But without financial headwinds, every decision taken by companies is taken after thorough scrutiny. This ensures that they don't take too much risk, especially in the beginning, and earn enough revenue to grow the business.
Here are three ways entrepreneurs can use a lack of VC funding to their advantage to create a successful, revenue-driving business.
- Learn from every mistake
Without financial backing, companies must develop the discipline to get to the root of problems and solidify the foundation to ensure longevity. Mistakes are inevitable – but it's important for entrepreneurs to learn from them so they don't repeat the same mistake. To turn mistakes into a learning experience, companies need to examine each part behind the errors.
When mistakes can be fixed with money, it's easy to correct them and move on without realizing what went wrong. Making mistakes—and understanding the why behind each one—can fuel future success.
- Generate revenue first, bring big ideas to life later
Investing in big ideas before finding market fit or demand can make or break a company. An innovative idea can only be a successful product or service if it has an audience. That's where many companies go wrong - they have a great product, but it doesn't solve a problem in the market. It's a struggle for companies with and without funding, but with money in the bank it will be easier for companies to understand the needs of the market first and jump straight into development.
When companies have to rely on themselves for funds, they need to generate revenue quickly. This means they will use the money to ensure that their product or service addresses a market need and will be bought by their target audience. By prioritizing profitability with practical applications from the start, companies can build a solid foundation and create a secure company that can innovate thoughtfully. There's always room for big ideas, but it's important not to rush into them - no matter how tempting they may be.
- Build for the future
New startups are emerging every day across industries. In a very fast-moving and highly competitive industry, there is no guarantee that a company will still be a company six months from now. A spur-of-the-moment mindset drives entrepreneurs to prioritize building in the short term.
Although it is impossible to predict the future, you can prepare for it. For example, from the dot-com tech bubble of the 90s to the explosion of the Internet to the recession of 2008, global tech company Infragistics has built itself to withstand the evolving technology industry for nearly four decades. It wasn't luck or being in the right place at the right time. They have never taken a single cent from investors, which has helped them build a strong foundation for their future success.
Every decision can seem like the most important decision made without the support of funding. This is an achievement. Each carefully curated decision builds a foundation that supports a successful company. With a strong foundation, companies can better adapt to industry changes and overcome challenges in the long run.
