One of the hardest things for any business owner can be knowing when to be bloody minded and when to be pragmatic. Every founder has a vision of what they want their business to represent, but sometimes this can be at odds with the need for capital, and the vision of the investors who provide it.
When Katrin Herrling, co-founder of alternative finance broker Funding XChange found herself short of cash, she says staying true to her vision for the company was ultimately better in the long run.
"Quite early on in the business we had a significant investment round fall through a week before it was meant to close. We’d spent nine months undergoing due diligence and discussions and we’d agreed absolutely everything, but they pulled out a week before the deal.
"That was one of the moments that my co-founders and I sat down and questioned whether we could go on. It was 9 o'clock at night and we were out of money.
"The fall-through had left us a couple of million short, but there were other offers on the table from other investors that could have filled the hole. In the end we actually chose the much harder path of self-financing, because those other investments weren't aligned with our vision for the company.
"They ran a large brokerage – the objectives of a brokerage are to minimise transparency for the business and achieve the highest possible commission rate for the broker and this was clearly not aligned with our vision.
"A year later, we were in a much stronger position because we’d fine-tuned our operations and thought hard about how we were going to make money.
"This entire experience taught me the importance of staying true to your vision. That can be quite hard when you don’t have any money, but I think if we’d taken a large corporate investment, we probably would have splashed out and not focused on actually making the core of the business work as smoothly as possible."
FOR MORE INFORMATION
For some advice on surviving the early days as a start up, read this piece by serial entrepreneur Faisal Butt. Have a look at this article to find out how to make better decisions. Herrling was profiled by Management Today back in 2016.