How to build a startup without friends or family funding

Starting a business is a huge undertaking, and one of the biggest early challenges is to secure funding. For those from less advantaged backgrounds, this can be a brutal first hurdle.

And that’s because there’s a horrendous concept in the world of early-stage startups called the ‘friends and family funding round’.

To get the capital needed to kickstart an idea into a real product or service, founders are usually expected to initially fund their business by raising money from people within their immediate network.

Not everyone has a rich banker uncle

Some 75% of founders come from advantaged socio-economic backgrounds, according to a 2019 report from Cornerstone Partners. This means they have access to a wealthy network that they can call on for funds.

Of course, for many people, this is simply not an option – it certainly wasn’t for me.

When I launched my mission-driven tech startup Zero Gravity at the age of 21, I certainly didn’t have anyone in my network who could invest in my idea.

I had to operate for the first nine months with next to no funding. It’s challenging, and a lot of hard work.

Not everyone has a rich banker uncle who can invest £50,000 in their idea. But it’s possible to start and scale a business without friends and family funding. Here’s how.

You can do a lot with a little

It’s possible to start small with whatever funds you’re able to gather up yourself. This could come from any savings you may have; additional income from a part-time job; or, in my case, from the last shreds of my student loan.

In 2018, I finished my degree at the University of Oxford. I’d made the journey there from state schools, and saw first-hand just how high the barriers are for ambitious young people from low opportunity backgrounds to reach top universities and careers. I wanted to change the fact that talent is spread evenly, but opportunity is not. I did so by building innovative technology to unlock the potential of these young people.

After graduating, I moved back to my childhood bedroom in West Yorkshire, where I launched Zero Gravity with the last £200 of my student loan.

I didn’t have a huge sum of money, a fancy office or a big team to get going with initially. But, I had an idea, a clear plan of action, and a relentless drive.

I used some of the £200 to buy a domain name and web hosting. I relied on the skills I’d built in my teenage years when I was obsessed with technology and taught myself to code.

If you equip yourself with the required skills, you can be resourceful and rely on yourself to kickstart an idea, rather than needing to hire others. Now, recent AI developments have made this easier than ever before, by automating time-consuming activities and plugging skills gaps.

I used those self-taught coding skills to build a website and basic version of Zero Gravity’s platform. The money also allowed me to buy subscriptions to a variety of SAAS products to create professional videos, graphics, and marketing materials without paying an external agency.

While professional help would, of course, be better, these products can deliver 80% of the outcome at 20% of the cost – which is exactly what you need to get going.

Be strategically focused

When growing a business from nothing, it’s important to create milestones for the business. You should be relentlessly focused on achieving a few set goals, before moving on to the next stage.

Remember, you can’t change the world overnight. Too many founders overstretch themselves by concentrating on too much at once. Focus on developing the core proposition of your business first.

I focused on building an algorithm which leveraged big data to identify talented students from low opportunity backgrounds while they were still at school. I then built a mentorship platform that connected those students with current undergraduates who mentored them into leading universities.

While lack of resources will feel like a constraint, it will also spur creativity, and make you more innovative and efficient than the competition. Use your leanness to your advantage!

Use the power of storytelling

To generate external investment without relying on friends and family, you need to create awareness of your initial business idea. No one will be interested in your business unless you make them interested.

You should focus on telling the story behind your business, and use social media and PR to drive it.

Firstly, know what your brand is about by having a clear mission, a distinct set of values, and a vision for the future.

To amplify this, you don’t need a paid media budget or marketing team when you’re starting up. Once I had the basic version of the platform set up, I used online software to create a video that explained how it worked. I used this to launch Zero Gravity with a marketing campaign on my own Facebook profile. My friends and family reshared it, and then their networks did. I had over 1,000 user sign ups within the first 24 hours!

The social buzz was spotted by student publication The Tab, who covered the business. From that, The Times wrote about it, which led to investors getting in touch with me through LinkedIn.

Find external investors that are right for you

When raising seed investment, if you have no network, you need to build one. I worked closely with my initial investors to build a network which enabled the company to scale from raising a £425k pre-seed to a £3.5m seed. While creating a buzz on social media and earned media will help with growing a network, you also need to be reaching out to interesting people on LinkedIn.

Also, remember that not all investors are your investors. You need to find people who are right for your brand. Our investors are all social impact investors, many of which are from low-opportunity backgrounds themselves.

You need to stand for something and be willing to defend it. Listen to feedback but understand that, at the early stage, not everyone is going to buy into your vision. Focus on your unique mission, whatever that is, and you’ll attract the people who are genuinely invested in what you do. That way, they’ll support you for the long haul.

The road to success

Despite starting out with just £200, over the past three years I’ve raised £4 million of investment, and Zero Gravity has since mentored over 8,000 students from low opportunity backgrounds into the UK’s top universities.

The platform is now also powering students into their dream careers through commercial partnerships with leading employers such as HSBC, KPMG, and Morgan Stanley.

If you start with no money, network or insider knowledge, you’ll have to defy the odds to succeed. If you solve a problem that you deeply understand and have a unique perspective on, investment and success will follow.

Source: startups.co.uk