Startups: 3 Ways to Extend Your Runway and Avoid Burning Cash

November 9, 2014

6:00 pm

According to a recent venture capitalist database survey, most startups run into problems because there is simply no demand for their product. But the second most common cause of startup failure is “ran out of cash”.

If you're running a startup that has a fit in the market and provides a genuinely useful service, you will want to conserve financial resources wherever you can.


1. Pick your fights

Bill Gurley, a venture capitalist authority who led initial investments on Twitter and Snapchat, recently talked to The Wall Street Journal about his take on the startup scene.

In his opinion, the vast sums of cash provided by venture capital is the death of most startups. Companies looking to claim a piece of the next big thing are all-too-keen to back numerous new businesses, hoping that at least one will prevail. The result is a marketing battlefield rife with unnecessary expenditures and startup failure.

Of course, in the mind of the eager startup it’s never “unnecessary” to raise money. Especially when competitors are busy throwing their money at promotional opportunities in a bid to steal the limelight.

After all, most rival startups are very similar, so the only way for them to differentiate themselves is to compete through marketing activities.

As Gurley says, you can’t afford to be conservative when faced with an aggressive competitor – you’ll just lose market share. But you can choose ways to get your brand out there without shelling out for it.

The ridesharing service, Uber, has emerged from the maelstrom of startups who all had the taxi industry in their sights. And while it now feels like an established enterprise after much news coverage, there is still no end of competition for them. However, their marketing practices don’t consist of wasteful self-promoting events or advertisement. Rather, they source ways to make themselves useful on a large stage – leading with their idea and protecting their funds.

For example, they have been part of numerous collaborations with reputable brands including Topshop. This collaboration didn’t cost them any money, and in the short term it didn’t make them a lot of money either. But it did introduce them to a big audience who would value an alternative convenient taxi service: shoppers. Through using a Topshop provided promotional code, users could request a free journey to Topshop with the Uber app.


2. Pick your base

There are many startups operating from unjustifiably extravagant offices when they’re not making any money.

While it may seem important to “keep up appearances” by providing your employees with the lavish environment that your competitors possess, it’s not a particularly wise investment when it’s coming out of the venture capital piggy bank.

There are scores of options for situating your business within sophisticated environments without the excessive fees.

One such option is the renting of a coworking space. These spaces have become increasingly popular over the last decade and have many benefits, not least of all preserving your bank balance.

On any given day, the occupants of one room in a coworking space could include traveling founders, home business owners eager to get out of the house, or entire startup teams and small businesses.

For a step up from the coworking space, serviced office providers like i2 Office can offer sophisticated spaces in prestigious locations that come complete with free courier services and reception staff.


3. Pick convenient solutions

With the hiring process being such an integral aspect of any startup’s success, it makes sense to dedicate time and money to the search. Unfortunately, due to the fiercely competitive candidate pool in any recruiter’s acceptable vicinity, this usually leads to a waste of both.

By turning to the cloud-based opportunities supplied by Google Drive, Hangouts, and Skype, you can enable your employees to work remotely. This means you don’t need to limit your hunt to the usual 50 mile radius. Instead, you can make yours a global exploration for the ideal employee. Not only are you more likely to find the best fit for the role, but you’re probably going to pay less too, and not just because you won’t necessarily have to provide a workstation.

You could well end up recruiting the right person for the job who lives in a different time zone. But as long as you arrange for mandatory check-in times and lay out clear objectives and performance indicators, there shouldn’t be any issues.

Indeed, the cloud presents many alternatives with vast benefits for those who are ready to embrace them. According to a well known commentator on accountancy technology, “if you choose not to embrace the cloud you are retiring in five years”.

Let’s face it, every business needs to dip their toes into the murky waters of accountancy every so often. It’s not fun, but it doesn’t need to be difficult and it certainly doesn’t need to cost more than it should.

Make sure you don’t get roped into paying for the seemingly amazing services of expensive accounting software when you don’t even use all the features. For example, the London based accountancy firm 3 Wise Bears work exclusively through the cloud with software that allows you to expand your financial needs as your business grows. This means not having to pay wholesale for a product that’s aimed at larger corporations from the outset – you simply pay for more features as and when you need them.



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Simon Davies is a London based freelance writer with an interest in startup culture, issues and solutions.