3 Tips Tor Startup Founders To Prosper Without Investors

Throughout the previous year, the startup landscape found itself grappling with a pronounced downturn in venture capital funding. A Crunchbase report indicated a 38% decline in global startup funding, seeing it plummet to $285 billion compared to the preceding 2022. This substantial reduction in available capital set the stage where startup founders had to face some truly arduous journeys in order to secure crucial investments for their businesses.

In the face of such daunting market conditions, a pressing question emerged: How could startups scale their operations in the absence of investor support?

In this article, I share some of the insights related to this question that I've gained over the course of my own entrepreneurial journey in fintech.

Minimizing Launch Costs

Today, we find ourselves at a point in time when attracting investment is difficult, especially for early-stage startups. This is due to low-risk appetite being the prevailing sentiment among potential investors. Therefore, for many founders, there remain two options: to invest either their time or their money.

The best thing anyone can do in this predicament is to think about how to most effectively allocate the resources that they do have. The goal should be to maximize the return on investment in order to achieve some kind of viable result under the given constraints.

Usually, when you have an idea, the first instinct is to immediately try and outline it in all possible detail. As a consequence, you often get distracted by niche features that can be mistakenly thought of as the key to success. One must not forget that without the core product structure being functional, customers won't even be able to reach the extra features that you envision.

Therefore, it is important to know when to restrain yourself and strive for a reasonable and viable minimum that can ensure a successful launch. Functions that do not serve to connect you to your future users in the shortest way possible need to be cut out. It is crucial to revise your product description multiple times and determine which aspects you can afford to sacrifice for the time being and which ones absolutely must be present if the product is to function at all.

Part-Time Personnel Employment

For many fintech companies, a significant portion of expenditure goes toward personnel, especially in the early stages. The development team, in particular, acts as the main driver behind the company's initiatives. In situations where cost-cutting becomes a necessity, one viable option to explore is part-time employment arrangements with team members.

Mind you, the focus should not be solely on reducing costs by hiring cheaper personnel. Rather, you need to secure people who, despite potentially higher costs, can consistently deliver high-quality results, even if the roadmap timeline gets extended because of this choice.

Furthermore, it is essential to maintain caution when forming such agreements, particularly with individuals who are new to the collaboration. If you have specialists on your radar with whom you've worked before, reaching out to them would be preferable. Previous experience lends itself to a more predictable outcome since you already know what you can expect from those people and how to plan around them.

Keep in mind, though, that opting for a team of part-time workers places a significant responsibility on you as the founder. When choosing this path, you must be prepared to assume direct control of the entire company and manage the operations of various departments simultaneously. It can be quite a challenge to manage such a regimen, and you must consider carefully whether you are willing to carry the risks of this approach.

Piggybacking on Licensing

Obtaining authorization to carry out business activities is another thing that always requires a lot of work, especially in fintech. Acquiring the necessary licenses involves capital and time investment, as well as meeting various strict criteria for compliance when executing operations on behalf of clients. This poses a substantial barrier to market entry, particularly for early-stage startups.

One way to mitigate this challenge is leveraging third-party providers that already have an established infrastructure and the necessary licenses and compliance measures. Yes, this means relinquishing certain benefits tied to being a license holder, such as direct control over cash flow management. But in exchange, this approach eliminates a major obstacle that often impedes many startups, allowing for accelerated market entry.

You can explore partnerships with providers willing to allow testing of your product within predefined limits, so long as risks and benefits are transparent and acceptable to them. The key point here is that you don't have to pursue an independent license immediately, as many tend to do. Obtaining it can be a lengthy process, and once you start on this path, you won't be able to provide your services/products until the licensing process concludes.

Doing It Alone is Hard, But It Has Its Rewards

Launching a product without the financial backing of investors presents a highly challenging endeavor. However, there are a couple of benefits to it that I believe should be pointed out.

Firstly, there's the matter of independence. Launching a startup without investor support means founders have unparalleled control over their business decisions and strategic choices. They can shape their vision and operational plans according to their own objectives, prioritizing meaningful value to customers in the long term rather than investor expectations of immediate profitability.

Secondly, the success narrative. Being able to overcome hurdles and create a viable product that attracts early users in the absence of investor support makes for a compelling testament to the resilience and viability of your venture. Startups that manage to thrive under harsh circumstances stand out in a market saturated with proposals. Having a success story in the initial stages like this would definitely generate interest and respect from investors. As a result, when you decide it is time to scale your business further, they will be more likely to engage and cooperate with you over possible competitors.

Alex Axelrod is the founder and CEO of an international payment platform Uluky.