Having been in the space where I have dealt with start ups for about two years one of the things I have learnt is the importance of finances in the development of young businesses. At the same time, I have realized that start ups need to look beyond the financial investments and also need to be creative in how they look for the funding. Four of every five start ups you will interact with will state access to finance as one of the top challenges they face in running small businesses. The situation is made harder by the fact that financial institutions shy away from giving financing to start ups as they are considered high risk and have no credit history financing institutions can use to determine their credit worthiness. This however does not mean all is lost for start ups. Today access to finance for businesses is diverse and can be done in various ways three of which I touch on below.
Align your business to the current national and international priorities. This means for a start up an understanding of the global and local development agenda is non negotiable. One may wonder what this has to do with a start up. Funding for the development partners and also governments is determined by development priorities. Development partners and even governments have been providing funding to start ups where such businesses have shown alignment to their development agenda. An example would be the recently established Climate Change Fund in Kenya whose use will be purely dedicated to matters climate change adaptation and mitigation. To access such a fund a start up must be able to articulate how their business contributes to the mitigation and adaptation efforts.
Social impact in development of businesses is very crucial in the world we live in today. Beyond making profits there is an increase in appetite for social investment in the investment world. There are investors that beyond wanting to have returns on their investment are keen on what social impact the business they invest their money in is having. An example would be a business that increases access to water in the ASALs. What such a business shows is, they are solving a social problem but at the same time creating business from it.
Leverage on what is already available and other strengths that do not necessarily need a financial investment. Need for finances for start ups can be overwhelming and even quickly cause one to forget other opportunities that may exist around them to create a successful business. This include marketing of the business, creation of useful networks through networking events. Marketing can be done using minimal financial investment especially in the digital world where every product can easily be sold on a screen. Creation of networks helps the start ups to learn from others who are either at the same level or who have walked the same journey before and are in a position to offer guidance on what has worked for them and what has not.
Access to finance in a business is fundamental but before a start up gets to that level where they have the amount of funding needed to push their business to the next level, diversity and flexibility has to be part of their business strategy. Be willing to change and do things different and always remembering everything in a start up does not depend on finances. There is a lot you can do to put your business in the map even before you spend a coin on it.
Picture courtesy of Urbankenyans.com