Don’t make a habit of raising funding

Even the best entrepreneurs with the best ideas and the best business minds find it very difficult, if not impossible, to grow their businesses without relying on some form of external capital.

Gulf News has asked me to write this column to dissect the capital raising process from start to finish and help make order of the chaos that is fund-raising.

Over the coming few weeks I’m going to take you on a fund-raising journey — how to raise capital, where to get it, what to do when you get it and what to do once you’ve spent it. I hope you enjoy the column and find it useful.

I love building businesses. Remember the feeling you had that day when you realised that all the talking, researching, sounding out of a business idea have now actually turned into a business?

I love that day. I’m addicted to that feeling. And as CEO of eureeca.com, I get to share in that feeling every day with the many hundreds of entrepreneurs that have applied to use our funding platform.

When it comes to raising funds, there is no formula, no steps that guarantee success. Funding is an art not a science, and often the decision to invest in you or not comes down to circumstances well out of your control.

However, there are many tricks and tips, well beyond having the right Excel spreadsheet or “model” that can make or break your funding campaign. And these are in your control.

I’m going to let you in on the insights I’ve learnt during my career, both through personal experience and from advice given to me by many of the big players in the funding game, both here in the Middle East and globally.

Here’s my first piece of advice: Think very hard when deciding if you should start raising funds or not.

Why? Because raising money is addictive. By that I mean that from the moment you get that first chunk of cash your business is addicted to it.

You will loosen your belts, hire more people, splurge on unnecessary luxuries, and the money will be spent. Then you will need more money just to fill the holes in your cash flow created by this new burden on your costs.

The moment you finish your funding round, you will take a month’s breather and be back at it again, thinking and preparing for the next round. Point is, it’s a train that once you are on, it’s very hard to get off.

Take a step back and think …

Do you really need the money? Do you need it now? The easiest way to get investment is to show an investor you don’t need it.

If you have proved your business model by bootstrapping, or rather making do without spending much, through paying people with “sweat equity” (free equity instead of cash), then you are a much safer investment.

Compared to 5-10 years ago, it really is so much cheaper and easier to set up and run a business. You can get so much stuff for free or very cheap online.

Need a warehouse? Share space with another business. Need an admin person? Contract it out on Nabbesh.com.

The best processes and workflows we have in the companies I have set up came from when we had no money, when we had to be the leanest and most efficient machine possible.

There’s a reason for this. And that reason is what creates great companies.

Lesson one: Money, especially early on, risks making you over spend and your business inefficient. Bootstrapping will help you build lean systems and workflows and teach you how to stretch the value of every dollar.

This process will build the sturdy foundations of a great business and will prepare you to remain lean and resourceful once the money does start pouring in. Too much money too soon doesn’t give you this chance.

— The writer is the CEO of and Co-founder of eureeca.com