When it comes to funding your business, there are many routes to do it - and if traditional funding methods aren't available to your business, there can be ways to do it yourself, or with help from friends and family. Gennex is a renewable energy company providing solar solutions and working internationally, and when co-founder Nat Peat found UK banks unwilling to lend, they decided to find their own way. Here's their story!
Gennex is a renewable energy company providing solar power solutions for the developing world in both the consumer electronics sector, residential and commercial off grid power sectors. Our company, although commercial operates with a deep social foundation where we teach and train people in poverty how to build, assemble, install, maintain and sell our products.
By operating this way it enables us to positively impact in five areas:
- Gender inequality (empowering women in science & engineering)
- Youth unemployment
- Addressing climate change
- Dealing with energy poverty
Finding initial funding
When we started out it was extremely hard to get a loan from a bank with less than 12 months worth of accounts. We had no choice but to look for other options.
In the early days we used our own money from savings and from our other enterprises, crowdfunding and investment from family and friends, in addition to getting a bump up loan from Virgin StartUp which helped us to set up and facilitate early orders overseas. Having the cash has helped us to develop new products, set up our office, pay for licenses and do many other things related to the business.
Since then we have grown, and now we are registered in four countries - the outlook is looking very promising for 2018 and 2019.
Benefits of funding ourselves
There were several benefits with the early stages of fundraising, mainly because we had no problem funding our own enterprise. In addition, receiving family investments was a lot easier because they could see our struggle and also believed in our ideas and business. They never asked too many questions and understood what we were trying to create.
Challenges and overcoming them
Good cashflow is an essential component in any business and sometimes special measures need to be implemented. After a problem with a client in Africa, we made sure we implemented contracts that mitigated our risk.
Essentially what happened was that this client had ordered £100,000 worth of product. Of course to begin manufacture and organise testing/shipping it came at a cost to us. Fortunately, before any goods were shipped, we discovered that the client didn’t have the capital to pay for the order. We quickly got contracts in place and mitigated this risk by ensuring we got at least 50% of the costs upfront and then 50% would be paid on delivery. This measure has saved us a few times, and now it’s a standard policy when working with any potential distributors.
Other challenges have included low-level managers at high street banks that don’t understand international business and lack knowledge on the bank’s products. At one bank we were told we could pay people in Kenya using the bank’s mobile-enabled app. This was false information and we were forced to set up a local account and heavily use remittances to pay staff overseas.
Other challenges have ranged from dealing with Government red tape and layers of procedures and regulation, to maintaining good cashflow while waiting for international invoices to be paid from clients, being over charged for office and warehouse space and my business partner having to deal with gender inequality when trying to conduct business. Despite all these challenges, the biggest challenge came from corruption with clearing agents.
All of this has been good for experience and since then we have learnt exactly what to do and have mitigated most, if not all, these risks. Without the challenges you can never learn. Knowing all that we do now, setting up in another African country was simple, as we knew exactly what to do and what to avoid.
Here are my tips for starting a business on a shoestring budget and need to raise finance.
Enlist the help of friends and family that can assist you with the work and contribute to funding some of the early-stage activities associated with the start-up costs.
Advertising can be expensive, therefore make use of free advertising. Editorial pieces are about 2.5 times more powerful than a paid-for advert. Make good use of social media - YouTube, Instagram, Facebook and LinkedIn are all good ways to let people know about your business, without having to spend huge amounts of money.
You can also think about crowdfunding as a potential option, but before you launch it ensure you have a good plan. It’s not just about launching a page and hoping that you will reach your target - you have to have at least 30% of the funds available before from individuals that you know are able to give. Look at your entire network and let them know before that you will be launching a crowdfunding campaign, and try to get a commitment from them early.
Once you have your story and project plan lined up, start a closed crowdfunding round for the first two days, and then the day it goes live to the public you will already have 30% of the funds raised and people are more likely to give. You can also work incentives into the campaign.
You can reduce the cost of office space by hot-desking or working from home. For business meetings you can also think about using the hot-desking facility space which often will have a boardroom you can hire for a cheaper cost.
All in all business is fun but it comes with several challenges, especially when you need finance. Don’t give up, keep on going and never quit. Surround yourself with people that can encourage you and motivate you when you get discouraged. Remember that the only limitation that exists in this life is the one in your mind.
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