Show Me The Money: Startup Funding

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Funding is one critical element that every entrepreneur needs to prepare for. It enables every startup to advance from idea stage to business planning to creation and scaling up.

Funding Your Startup

There are three general categories of funding: bootstrapping, debt and equity. Bootstrapping

includes minimizing the spendings in personal and business finances. Debt covers bank loans, trade credit and borrowing from friends/family (a.k.a. “love money”). Equity includes crowdinvesting/crowdfunding, convertible notes, and even funds from friends/family, depending on your agreement.

Preparing For Funding

Before searching for and choosing a source funding, the most important step for every entrepreneur is to create a business plan. Defining goals and milestones allows for a more accurate projection of one’s financial needs, especially the minimum budget necessary for at least the first year of building a startup. Founders, along with their co-founders, also need to assess their current financial situation. Evaluating your starting point and short and long-term needs as accurately as possible makes for a more solid financial assessment.

Some questions to consider: How much funding will you need? Will you be dedicating yourself to your new startup full-time or just part-time? If you choose to do it full-time, you may need to secure more funding upfront to cover operating costs.

Below are some sources of funding that founders can consider. Sources can be combined depending on the amount needed after a budget evaluation.

Sources of Funding

Love Money

The most accessible source of funding is “love money.” Love money is capital you extended to your business that has family or friends as a source. The agreement around the funds is oftentimes customized according to the particular type of relations between the two parties.

As friends and families already know you–your values, your personality and possibly, your work ethic–a certain level of trust is already established, making them often the likeliest source of support for your business when you’re just starting out.

Outside of your immediate circle, you can also look to former colleagues or fellow alumni as potential investors in your business.

Talk through the terms with them informally but do try to establish whether it would be considered an investment for them or just a loan. You do not need to specify the terms as a business agreement, but clarifying the terms of their involvement in and expectations of your project will help to secure a good relationship in the long-term.

Convertible Notes

Another source of funding is a Convertible Note–a form of short-term debt that later converts to equity. Why use convertible notes? Convertible notes involve a faster setup and a simpler agreement. For one, it does not need a pre-valuation of a business at the offset for investors. Additionally, it avoids or minimizes turning over control to investors. Overall, it allows a for a degree of flexibility of terms when compared to other more formal agreements.

Using convertible notes can be a challenge when one is unfamiliar with how they work. Understanding it may take some time but it could be a helpful source of funding for any business. Here is a good resource on convertible notes with scenarios on coverage and agreement terms.

Crowdfunding or Crowdinvesting

Crowdfunding and Crowdinvesting are two methods for raising funds that provide access to a bigger pool of investors. Compared to other methods, they save time and money. They also help you to avoiding incurring a debt in case of an unsuccessful launch of a business.

Crowdfunding is a method of pitching a product or service to the masses. The support that any crowdfunding campaign receives is already a means of market validation of a product/service. Some challenges in doing a Crowdfunding campaign are outlined below:

  1. You need an engaging story. The value of a business idea needs to be communicated effectively to the market.
  2. Unfamiliarity with crowdfunding or the platform itself. Businesses may need to educate their target market/potential contributors about crowdfunding.
  3. Consideration of payout fees for platforms to use

Here’s a quick guide to a successful crowdfunding campaign:

  • Get family and friends to jumpstart funding for higher visibility
  • Present a realistic business plan that shows how the contributors’ money will take the business to the next level
  • Be active online throughout the campaign period in all channels (answer inquiries, do continuous promotion, track progress)

The most popular crowdfunding websites are Kickstarter and Indiegogo. For a more comprehensive guide, here’s a resource on Crowdfunding.

Crowdinvesting is an equity-based crowdfunding; it is similar to crowdfunding but is aimed instead at investors. Crowdinvesting widens a start-up’s access to potential investors, including individual investors. In addition, It doesn’t necessarily require company valuation to get the support needed.

Crowdinvesting also has its own challenges, with a need to take the following factors into account:

  1. Proof of concept & market traction (needed right off the bat, unlike in crowdfunding)
  2. Financial projections
  3. Terms of agreement have to be explicitly defined–not flexible to amendments thereafter
  4. Investor relations are of utmost importance. Founders/ business owners need to build and maintain them.

Sample crowdinvesting portals are FundedByMe and Seedrs. Here’s an additional resource that can be used as a guide to running a successful crowdinvesting campaign.

Evaluating Funding Options

Each source has its own challenges. The key is to assess which method of fundraising fits your current situation and your business goals. There are several other funding options, both traditional and non-traditional methods. Whichever method you choose for your startup however, make sure to do your research thoroughly and be prepared to answer potential investors’ questions.


The Wave of Venture Builders

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A Recent Model: Venture Builder

Monkey Inferno, eFounders, Rocket Internet; a wave of venture builders is taking up an increasingly key role in the startup ecosystem.

It is difficult to trace when the model of the venture builder dates back to, but at least as early as 1996, Idealab, an early pioneer, was already pooling talents and resources to invest in and launch multiple startups at the same time. By 2016, a crop of articles on venture builders fully legitimized a distinct operational model within the startup world. When “The 300* Startup Studios Taking On the World” appeared in Medium in March of 2017, a sense of bounty in the long list made clear the fact that the venture builder (or “startup studio,” or “digital lab”) is a concept that is here to stay.

Despite the proliferation of venture builders, one obstacle a venture builder faces is in establishing its difference from an accelerator or a venture capital firm. Perhaps, “startup studio” is still the best name for describing what a venture builder does. Like any kind of studio, a venture builder produces things; in this case, startups. A studio production utilizes equipment and team that have worked across different projects, putting its stamp on whatever new productions it puts out. Similarly, a venture builder enables startups to leverage its internal team of business developers, designers, developers, marketers and sometimes VCs in the ideation, development and launch of a company. It is a strong business model and one that is structured for acceleration: invest in a fully equipped, talented team, identify a few things you do well, replicate the model and put your team to work to grow different businesses in parallel.

Yet although a venture builder takes equity in the startups it helps to build; it differs from the aloof VC model of “parallel entrepreneurship.” A VB is not just looking for a quick exit. Like accelerators, venture builders provide the necessary support and resources to early-stage startups, but while the ventures that are part of an accelerator program remain separate and external to some extent;  a VB is more hands-on and often functions as an interim co-founder of the ventures it helps to co-launch.

How Does it Work: The Rocket Internet Example

Venture builders gained their visibility partly through the tech superstars that have been behind some of the most prominent VBs out there. These include Obvious Corp (Twitter, Medium), Mark Levin’s HVF (Hard Valuable Fun), which is behind, Betaworks (, Giphy) and Germany’s Rocket Internet (one of its most recent successes is Southeast Asia’s Lazada, now owned by the Alibaba group). Since having an experienced team behind a venture minimizes risk, VB-backed startups typically gain more access to funding. Providing a network of angel investors and the full resources necessary for the development of a project, VBs act as equity partners and can take as much as up to 40% equity in any of the ventures they help to launch.

The Rocket Internet example is a well-known one. Rocket Internet does not look for the new thing in the market so much as it identifies and replicates good business models. Entrepreneurship is inherently risky business, and Rocket Internet’s success is in large part dependent on replicating a tested-and-proven model in industries in which they have some expertise. Although often accused of being a factory that churns out copycats of proven startups, Rocket Internet has gained rather than lost through identifying the startup models that work and reproducing them rapidly in emerging markets. In the process of launching a new venture, Rocket will usually recruit internally to staff these startups, before slowly transitioning out of the ventures which are expected to become independent entities. For all its flaws, Rocket Internet showcases the venture builder’s strength, the ability to transfer institutional knowledge across the startups in its portfolio and thus to increase the probability of success in execution.

The Creatella VB Model

The VB model continues to evolve. At Creatella, we build internal startups which are in-house projects ideated from within the team and developed from scratch (e.g. However, we also work with startup founders whether they are in need of a clickable mockup, tech development, or are looking for a committed team to take up the role of a CTO. As with the classic venture building model, Creatella provides the resources of a complete in-house team. We leverage our team and knowledge to help founders succeed. We are willing to take a measure of risk in the projects we take on, and are on the lookout for passionate innovation, even if it does not yet have a proven record of success. We also pride ourselves on partnering for the long-term, integrating into existing teams and in staying lean. We believe that a founder’s vision for a project matters, our role is in ensuring the quality of its execution.

The VB model is an increasingly attractive one in a high-risk startup market. It is hard for a startup to succeed; partnering with a team that has done it before, many times, across many different ventures reduces the risk of failure. Since its inception in 2016, Creatella has worked with more than 30 startups worldwide (in Singapore, Paris, London and New York). We are a rigorously selected team of designers, developers, digital marketers and project managers. Together with our founders, we have raised more than 35 million dollars in our portfolio and we are restless to sustain our rate of exponential growth. Have a project in mind? Talk to us.




Quit, Pivot or Sweat it Out: How to Choose Your Startup’s Next Steps

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A Controversial Proposition: Plan for Startup Failure

The experience of running a business from scratch and achieving a certain level of success gives pride and hope for a better future for entrepreneurship. However, often startups need to keep evolving to suit the changing market environment and eventually be ready for any possible outcomes. A number of startups feel assured about their future roadmap and resist the idea of an exit strategy. However, experts suggest that having a good exit plan can actually increase the entire value of the business.

At some point in the life of a start-up, the founders or stakeholders have to decide whether to persevere, pivot or let a business die based on the value it generates for the target market.  For example, Youtube founders decided to get acquired by Google in 2006 and be the primary outlet for all video content. This provided the required momentum and ecosystem to achieve Youtube’s full potential.  Similarly, PayPal enjoyed a first-mover advantage in the online payments industry and competed with large banks. Still, its board members decided to get acquired by eBay so that it can achieve the required scale and penetration; as the PayPal model of business needed huge volume maintain its success.

How do you decide whether to persevere, pivot or let your start-up die?

Every start-up business needs to do a market test for its offering after a period of existence. It needs to implement a certain set of metrics targets and a realistic timeline to make a judgment for the future course of the business.

Let’s understand how to decide the business potential in the years to come:

Establish clear metrics that need to be reached

The companies can use sales metrics, financial metrics, customer conversion metrics and digital performance metrics to gain a better picture of the enterprise. Decision making using a combination of different metrics show the current position of the company.

Set a realistic target and schedule

A realistic timeline is everything. Startups need to set a realistic timeline to achieve the target numbers of the performance metrics. The timeline may depend on the various factors such as the funding availability, market conditions, concept awareness in the users.

Test value propositions of company to make the right decision

Based on the measurements of the metrics as explained above, the founders can make a decision about the future path for the businesses. However, usually it is not such a black and white decision; one must analyze the parameters before making a sound, metrics-based decision.

Now, let’s understand the above 3 points in detail.

  1. Establish clear metrics that need to be reached

The business should focus on right metrics for a better understanding of the company status. Identify the key value propositions to signify the potential of the business – for example, in some business models immediate profitability does not represent a viable parameter to measure, but the gross sales value makes more sense for future growth. Rely on Sanity analytics to improve the business and resist the temptation of vanity metrics. There are different types of metrics that startups should choose based on their business model.

Sales metrics – This can be measured to understand the total value of the product/services sold in the market over the period.  

Financial Metrics – Companies should on focus on profitability, burn rate, operational efficiency and gross margin to understand the cost involved in the production, revenue left for scale up, necessary and unnecessary expenses.

Customer related metrics – Key parameters to be measured are the number of subscribers, Customer Acquisition Cost, Retention Metrics, Churn Rate.

  1. Set a realistic target and timeline

Setting a realistic timeline depends on various factors starting from the market conditions to the larger economic scenario. Also, it depends on the type of offering; for example, if the offering is premium and niche then the timeline to achieve the customer numbers would be long, whereas if the offering is for the mass market, then the time to reach target customers might be shorter. In some cases the timeline is also driven by the availability of funding as adding new features requires more investments.

  1. Test value propositions of company to make the right decision

Based on the parameters measured explained in the above entrepreneurs should continuously reformulate or realign their value propositions.

Below are the steps to make a choice:

Test the viability of the business

If the company achieves the projected metrics within the decided timeframe and also shows future potential, one must decide to continue with it. However, it might be a right juncture to scale up the business. This can be done in two ways below

  1. Find external funding to grow the business organically.
  2. Merge with another business to gain access to the larger market, subscriber base, funding, complementary solutions/technology or the workforce


A business needs to understand the customer priorities so that best value propositions can be designed. If the metrics show a gap in your offerings and the customer expectation or there is a serious market change, there is an indication to pivot your business.  

You might have to change your target market, value propositions as per your unique selling points and the market fitment. Sometimes you have to change the business model and revenue model to suit the customer behavior.  This sometimes results in a completely new product or service offering compared to the original idea.

For example, Odeo, a network to find and subscribe to podcasts, saw the sudden change in the market when iTunes began taking over the industry. The company decided to make a drastic change and run with the idea of a micro-blogging platform which is now popularly known as Twitter.

Kill and exit the business

Founders and stakeholders need to make a decision to quit and kill the business if

  • It is not achieving the growth projected.
  • The target market is diminishing.
  • There is a disruption in the market completely changing the customer behavior and making your product obsolete.
  • There are no idiosyncratic capabilities or qualities that can be leveraged in another market or solutions.

It is always hard to make this choice, but founders must see the larger picture of the current business. Getting emotionally connected without a proper exiting plan can diminish or restrict the company growth. It is important that any entrepreneurs should reinvest resources both in terms of money and efforts for creating better value for the society.

Finally, every company should focus on creating net value for all its stakeholders in particular and for society in general. In an ever changing competitive environment, a wise entrepreneur invests his time and money in the right place, realigning his vision and goals whenever required.