Starting a new project, step 3: funding

Funding a start-up is my number one frustration. It is particularly difficult because in the early stages, when things are still in a formative stage, it is not clear what one needs funding for! I now have a track record in start-ups so I can demonstrate that I have the skills to lead things through the process of discovery – but this skill counts for nothing. In 20 years, I have never been asked once by a funder what my track record is in start-up.

The ideal funding for a not-for-profit start-up is a small flow of funding over a long period provided by a funder that understands the lean start-up process and is willing to put more money in if the process starts to expand. This has to include funding for one’s salary.

I have only ever experienced this ideal once – in fact, it is happening right now. It’s a great little project to set up a better connection between academic research in the child and family sector and the mainstream media. It is backed by and will be branded by two universities, Cambridge (UK) and Princeton (US). The funder is the Jacob Foundation in Switzerland. We are proceeding with it step by little step, adjusting as we go, always building on success and steering away from things that do not work. Recently, it was decided it should appear in four languages, not just two, and the Foundation quickly secured the extra money. We don’t yet know what the long-term funding model will be but we do know that institutions with money have an interest in continuing something if it is working well, so we are confident we will find the mechanism once the project is more mature; indeed, there is no other way we will find the mechanism.

Another approach is the crowd-funding approach, though the idea of having to raise everything by an artificial deadline seems daft to me, and disconnected from the reality of a start-up. Having a big slug of money all at once is a very precarious position to be in – the worst cock-up I ever managed was when that happened to me. I am in the middle of my first crowdfunding project, albeit a continual one without a deadline. I am mobilising teenagers and family lawyers all over the country to raise money for a new website for children whose parents are separating, KidsintheMiddle.org.uk. This is creating a stream of funding that is allowing the gradual building of a service; it is nicely suited to the incremental start-up process and all the fundraisers rather like the pioneering feel of discovering the project together. Everything about the project – both the fundraising mechanism and the thing we are building – has completely changed as we have proceeded along the way; we have made a whole series of completely unexpected discoveries, which we could only have made by starting.

The worst kind of money is grant funding. This kind of funding is fundamentally incompatible with start-up. Grant funders worship business plans; they have the idea that a business plan is what stands between success and failure. This is a fantasy and funders should know better (after all, they can afford to learn!) but I will restrain the rant for now!  If you have to build an entire business plan, most of which is pure fantasy, and then faithfully follow it, you are simply carefully following a pathway to failure. No start-up ever ended up in the place where it was originally headed. A good lean start-up plan looks like anarchy to a grant funder.

But in the desperate uncertainty of the early start-up, it is difficult not trying to get a funder to believe in the cause and share the risk. But I have found that following this temptation – which I always do! – is destructive. First, it distracts attention from the real work. Second, it creates a feeling of dependency on a white knight who is not there at a time when one is already feeling particularly vulnerable. Third, when the refusal comes it can be difficult to read. My latest refusal from Children in Need for one of my projects was a catalogue of put-downs, delivered from the lofty position of people who understand nothing of start-up but think they understand everything. And because I am addressing a new need (that’s what start-ups tend to do), the fund advisers denied there was any such need at all. I had the same experience years ago when I put an application to the Big Lottery for what is now the flourishing Travel Foundation. Then the Big Lottery Fund advised us that sustainable tourism was not an issue. But at least these big funds reply; most funders don’t event get back, which is the equivalent of begging on the pavement and have people walk straight past. Perhaps one day I will gain the confidence not even to dream about being saved by grant funding!

I reckon 20% of the success of a start-up is the idea; 80% of the success is the tenacity to keep on going long enough to get the resources.

  • http://primerascanciones.blogspot.co.uk/ mujerlibre

    Synchronicity. I needed to read this! Today, just as I was despairing a bit about my decision-making powers and was convinced that fear would mean I never took the plunge and ‘started-up’, along you came. Thank you. I’ve now carved out a (wobbly) route to self-employment. All that remains is ‘realisation’… I’ll get there. I’m sure. But I did appreciate your post – especially the ‘business plan’ rant. :-)

  • DuncanFisher

    If this piece helps only one person, it was worth it!