Startup Challenges: Tips for Founders – Part 2

Welcome the second part in our two-part series on Startup Challenges, authored by Ben Clarkson. Written for founders, this series is based on our observations from our partnership with Spacecubed’s Plus Eight accelerator program, where we have been involved through providing financial mentoring for founders and their startups since 2016.

In part two, Ben shares further observations regarding R&D grants and incentives, communicating company vision, and navigating the debt vs equity dilemma. If you missed the first part in the series you can catch up here.

1. Under capitalizing on Incentives: R&D Grants and ESIC

Startups often operate in innovative spaces, making them eligible for incentives like Research and Development (R&D) grants and Early Stage Innovation Company (ESIC) status. These incentives provide valuable financial support and can significantly impact a startup’s growth trajectory. R&D grants encourage innovation by subsidizing research-related expenses, while ESIC status offers tax incentives to investors who fund eligible startups.

However, we often see startups who aren’t aware of the funding and grants available. This isn’t a total surprise, as often there is a lot of research and work required to apply for grants, which can distract away from core business.

Founder Tip:

Engaging an experienced advisor who is familiar with grant applications and tax incentives often more than outweighs the advisory cost when the grant value is taken into account. These incentives can provide startups with a competitive edge and much-needed financial support during their early stages.

2. Not communicating company vision effectively to investors

Startup success hinges not only on a great idea but also on securing the necessary funding to bring that idea to life. Articulating the startup’s vision to potential investors is a crucial skill. This involves more than just sharing numbers; it’s about conveying the startup’s potential, outlining its unique value proposition, and illustrating how investor capital will be used to drive growth.

A lack of transparency is common pitfall, as is taking the time to craft a compelling narrative, and having the ability to reel this off with passion, excitement and confidence. Part of this ability lies in being able to understand your audience, and tailor your communications to the audience, and the channel of delivery.

Founder Tip:

When was the last time you asked yourself what your vision is? Can you articulate this succinctly, and clearly, in under a minute, and in a way that inspires an emotional response from the listener?

For founders seeking you improve confidence in verbal communications, media training and public speaking courses such as Toastmasters or rostrum can provide huge benefits.

Visually, well-structured and designed presentations of financial projections and visual representations of your big picture vision should support articulate verbal communications. Engaging a strong visual designer, and / or a marketing communications professional will provide you with a resource skilled in crafting effective visual communications.

3. Navigating the debt vs. equity dilemma

Raising capital is a pivotal moment in a startup’s life, but deciding between debt and equity financing can be perplexing. Debt financing involves borrowing funds that need to be repaid over time, while equity financing involves selling ownership stakes in the company. Each approach has its own advantages and drawbacks.

Founder Tip:

Founders need to carefully assess their business’s financial situation, growth prospects, and risk tolerance. Timing is also key – seeking financing at the right moment can impact the terms offered and the startup’s long-term financial health.

Taking steps towards addressing these challenges

Starting a business is an exciting endeavor, but it’s also filled with uncertainties and challenges. The journey becomes smoother when startups are equipped with the knowledge to navigate these challenges effectively. From structuring the business and crafting realistic financial models to managing cashflow, leveraging incentives, and communicating with investors, each aspect plays a crucial role in a startup’s growth story.

If you’re a founder in Perth, and find yourself grappling with these challenges, our accounting services for startups can offer a range of support resources. With a wealth of experience in guiding startups from our partnership with the Plus Eight program, we understand the unique needs and demands placed on startups and founders. Contact us today to take the next step in building a strong foundation for your startup’s success.

For more details on the services we provide for startups, visit our startup accounting and advisory services page.