How much do you need to start a business?

A recent study revealed that half of UK adults say that lack of funding has prevented them taking a business idea further. This is an issue we’re trying to address at Virgin Startup, as we know how important that first bit of funding can be to get you off the ground.


However there can be misconceptions about what people actually need to start up, driven by the media’s focus on multi-million funding rounds over in Silicon Valley. You don’t need hundreds of thousands to start up; the businesses we’ve funded with £25,000 or under, sometimes just needing as little as £500, are testaments to this. In fact, being OVERfunded can hurt your business too.

Here’s why you don’t need as much as you think to start up.

Funding can distract you

Raising money can be an exhausting job, however you do it. You’ll have to do things like prepare pitches, approach investors, and attend meeting after meeting. If you crowdfund, you’ll be constantly sharing on social and trying to drum up interest in your campaign. If you’re doing all of these things, you’re not actually working directly on your business and improving it.

Rather than focussing on funding at the expense of your business development, think about what you can do with a smaller amount, and get going. It’s called ‘seed funding’ for a reason – your business will grow and develop out of it.

It can slow you down

Maintaining business momentum is important. If you’re getting interest but you then switch focus to raising money, people will get bored and go away if this means you’re not enhancing your product. If your product isn’t even out yet, this means you may not have an income stream yet either, so the hard-raised money you’ve managed to win will go on everyday costs, making things more expensive in the long run. Raising funding can be a time-consuming process as you wait for people to meet with you, make decisions, and for money to get approved. Don’t wait!

Meeting expectations

If you go the investor route, the people funding you will be stakeholders and will therefore have a say in how your business is run. This can feel like a lot of pressure, especially if your business is still at an early, developing stage – you might not have the freedom to pivot or try new approaches.

With a method such as reward-based crowdfunding, overfunding your product means more orders to fulfil, which can put a huge strain on a new business.

You don’t learn as much

If you have lots of funding for your business, it can be tempting to just do it your own way rather than listening to what your customers want – you can afford to take big steps and don’t have to start selling it early. The temptation also might be to hide away your idea and use the funding to tweak it until things are ‘perfect’ and then release it on the public. The problem is that what’s perfect to you might not be meeting a customer need.

Getting a beta version of your product out, generating a bit of income and getting real-world feedback on what needs to be improved, is one of the best ways to learn that there is. Without the drive to get cashflow going early, you can miss out on this.

Another point: although nobody likes a business challenge, they’re ultimately unavoidable - and there’s no denying that they teach you a lot. Dealing with issues and problems on a limited budget means you can’t just buy your way out of sticky situations. You have to think your way out instead.

Overfunding can mean wasting money

If you have to work around a small budget, you necessarily have to be more creative in how you use your funds. If you have more money than you know what to do with, it can be tempting to flash the cash on swish offices, paying your staff more than they’re worth (including yourself), and spending lots of money on things that you feel your business definitely needs, but probably doesn’t. Cool business cards that pop out and are laminated in GOLD! A reclining massage chair for your funky office! An aquarium wall!

When every penny needs to be accounted for, you’re less likely to waste money and more likely to put more thought into your business development priorities. Plus, it’s a free lesson in resourcefulness.

It can be an excuse not to take action

Starting a business can be a thrilling but a terrifying prospect. Quitting your job, getting out there, following your dream – what if it goes wrong? It’s natural to make excuses not to get started, and there’s no denying that blaming lack of funding is one of the biggest excuses in the book.

Yes, lack of funding is a problem. But you don’t need to stockpile thousands and quit your job. You can take small, manageable steps with no funding – writing a business plan, doing a bit of market research using free tools, setting yourself up a website. Many of our businesses fit in a full-time job around starting up, or transition to freelancing or part-time work. Doing these early steps can help you decide whether running this business is truly the thing you want to do with your life, and whet your appetite for the next steps – and they’ll help you get funding when the time comes.

So make a promise to yourself to make one step towards your business that doesn’t require funding, such as using our business plan template to get your idea down on paper. The first step is the hardest. Once you’ve done that, you might find even the lack of a million-pound investor can’t keep you from getting your dream on the road.