Series: Funding your startup – Part 1: Should you look for funding or continue to fund yourself?

Let’s get straight to it: Startups need money. Yet, unless the founders are flush with cash, then most don’t have much of it. Many entrepreneurs in the UAE start off self-funding, but feel immense pressure to get an investor on board as soon as possible. Yet, what really matters is that the funding is timely and tailored to your needs. Let us explain. 

Both routes come with pros and cons, often the mirror image of each other.

Self-funding or bootstrapping means no dilution – you remain in control. You chart the course while testing out the idea with limited pressure from others. You retain all the profits too. Sounds great. But it also means less money, and so you may personally have to get by on very little. This brings with it anxiety and likely slower growth.

An investor means you have more money, flexibility on how you run your business and peace of mind. It means you have the cash to act when the need arises, and maybe even faster growth. Yet, it also means the pressure to get results and the need to listen to someone else. It could also dampen motivation, which sometimes happens when we’re no longer spending our own hard earned cash.

Assuming your business won’t fail without investment, the question then isn’t which route is better, but is the time right to seek funding? To answer this, consider these:

• Your reasons: Why are you seeking funding? If you know the specific reason, you’ll be better placed to decide if you can keep funding yourself and better able to convince someone to invest. If you don’t have a good one, then the time may not be right.
• >Your competitiveness: How strong is your business? Is the product marketable? How large is the market? What is the competition? You need to convince an investor that your business is worth their time and money. If you don’t have the numbers to back up your demands, then the time may not be right.
• Your vision: What are your long term goals? Things such as the speed you would like to grow the business, new products, and new employees. This will give you a good idea of the kind of money you need to support the growth and see how aligned your vision is with an investor. If your current ambition doesn’t require a big cash injection, then the time probably isn’t right.

f you’re ticking the right boxes for an investment, then go for it. There are plenty of options in the UAE to choose from, including angel investors, crowdfunding, venture capital, public funding and corporate investment. Last year, UAE-based startups raised USD 577 million in venture funding alone. 

And that wraps up our first blog in our series on startup funding. Stay tuned for part two next week. To catch up on all our past content do check out our blog at www.dtec.ae/blog.