How to Raise Money for Your Startup as an Early-Stage Solopreneur

What does this stage look like, in general?

As a solopreneur, you know what it means to take a leap of faith and dive deep into the entrepreneurial world to single-handedly work on a matter you deeply care about and propose your unique solutions to the world. It’s not easy doing it all on your own, even if you do hire some external subcontractors for specific tasks. In this phase, you may be winning your first clients, doing first pilots with trial customers, building your product or service, with or without technology (hopefully at least tech-enabled to be able to grow and scale faster).

What are the realities and challenges at this stage? What does it feel like?

It can be very lonely, where you can feel disconnected from others in the business community. While you can forge personal connections with clients and stakeholders, without a team, building a network and finding the right investors can be time-consuming and challenging. While it’s great to have complete control over your business decisions and direction, the burden of success and failure lies on your shoulders, you may feel a lot of pressure, which can lead to anxiety, fear of failure and overwhelm. Decision fatigue is real and it can sometimes be overwhelming without a team to brainstorm with and share responsibility. I remember being so tired by making so many decisions on my own that when my husband asked me what was for dinner, I literally snapped at him! I couldn’t take making one more decision that day.

Operationally, managing all business functions alone, can stretch your resources thin. Scaling your business can become a significant challenge without a team, stunting potential growth and expansion opportunities. This overwhelm can make decisions like looking for funding more stressful, especially if you’re learning about and doing it for the first time on top of building your business. Each of these factors can impact your energy when speaking to potential investors. Being part of a peer network like DWEN can really help you ask for help from fellow members and access the great resources on many of these topics in DWEN’s ON DEMAND video library. 

What you should know about raising funding at this stage, as a solopreneur?

There are many biases and disparities in funding opportunities and access to capital for women founders. Being a solopreneur can often compound these. Many investors might be concerned about the scalability of a one-person operation, fearing that growth may be limited without a team. 

Some investors are open to solopreneurs, especially at the idea and pre-seed stage, while most really want you to at least have some team members or partners in the pre-seed stage, before deciding to invest.

Other investors may perceive a solopreneur as less credible or stable compared to a team-based startup, which can lead to much more scrutiny and challenging questions during the funding process.

Some general key tips at this stage:

• First, you need to be very clear about the type of company you want to become and how big/fast you want to grow. This is the single most important decision that influences all the following decisions about hiring, funding and technology. Get clear on your vision for your company and where you want to go first.
• If you don’t have a team yet, consider starting to build your advisory board, who can also help you make find the right people for your future team.
• Make sure you take out ‘key man’ insurance to cover your operating expenses if you become ill for some time or in case of an accident – the bills will still need to be paid.
• Start by working with volunteers or contractors to help you build out your product/service, while saving having to have employees on the books at this stage.

What sources of funding do founders typically use at this stage?

Here are some of the sources of funding I’ve seen women founders use at the early stages of starting their company and some key insights on each to help you consider them: 

• Generating passive income on the side while starting their business as a side hustle: this is a good way to still have some financial security if you do not have personal collateral or savings to fall back on, as you start your business.

• Savings – often, many solopreneurs kick off their entrepreneurial journey with sometimes an exit package from a previous job, redundancy money, using an inheritance or using some personal savings to get started. Just make sure you have enough to live on as you start, keep your expenses as low as possible and try not to tap into all your life savings if you can avoid it.

• Credit cards can be used to kick things off and cover some expenses. Be careful not to let it get out of control and make sure you pay them back regularly. However, they should only be used for some ad hoc expenses, not as the main way of getting started.

• Grants are a great way of funding your business, as they are mainly perceived as ‘free money’, and neither debt nor equity. However, there is usually a lot of paperwork and reporting involved with grants and that can take a lot of time so be aware of it. Also, many grants expect you to pay the expenses upfront and submit receipts for reimbursement afterwards so make sure you have enough cashflow to cover the time you are waiting for reimbursement.

• Pitch competitions – many pitch competitions offer prizemoney which is essentially free money, no strings attached. In fact, I know a woman founder who became a pitch queen and won $250K in pitch money, winning many pitch competitions across the USA so don’t neglect this source of funding.

• Friends and family – raising your first angel investing rounds with people who know and love you and are investing in you, the founder, because they trust you and want you to succeed. Make sure that no-one is investing money they can’t afford to lose, as one woman founder told me she didn’t want to accept money from family because she still wanted to be able to have Christmas dinner and not feel pressurized if things are not going well with the business.

• Crowdfunding – there are many types of crowdfunding and at this early stage, using reward or donation-based crowdfunding can be great sources of funding and help you prove a market, engage your community and inject some cash in your business. Remember though that preparing a good crowdfunding campaign takes at least 3 months preparation and a lot of dedication and time to make sure you reach your target.

• Accelerators – Many accelerator programs accept solopreneurs if you are prepared to be matched with other potential co-founders or if you bring other team members with you. Remember they can take anything from 2-15% equity, some make you pay for their programs so make sure they are a good fit, before you invest 12 weeks of your precious time in there. Get as much feedback from founders who have been on the program to help you decide. Most accelerators offer demo days at the end of their program where you pitch to their investors and many founders go on to raise significant money.

• Customer revenue – The best form of funding is a paying customer. You’ll never hear me saying that enough times. Focus on getting paying and returning customers, so you’ll have enough cashflow to build runway and need to take on fewer investors and give up more equity early on.

• Revenue financing – If you have steady, growing revenue streams, you can look into getting revenue financing (where you give up a % of future revenue for equity) or factoring, where you ‘sell’ customer invoices (mainly with big corporates or government contracts) at a discount in order to receive immediate cash. The buyer of the invoice, known as the factor, takes on the risk of collections and usually charges a fee for this service.

Most women founders use a combination of some or all of these sources of funding to get to the next steps of building out their product/solution, testing the market, getting their first customers.