Winning funding from investors is the dream for many startups - but, when you're in the early stages of business and still finding your way, it isn't necessarily the right choice to give away equity at this stage (as tempting as it might be).

We chat to the Bernard Darko of Tiddall - a revolutionary new platform using data and science to provide customers with detailed, personalised recommendations on nutrition and exercise - about why they decided to turn down an early investment opportunity, and bootstrap instead.

Tiddall is an artificial intelligence platform that implements and optimises powerful meal plan and training strategies for anyone to lose weight or build muscle faster and more efficiently. Tiddall thinks, reasons and make decision based on data just like a humans does. It learns and improve itself and your strategies overtime.  As you change, so does Tiddall’s ability to change strategies to help you continue to progress. We started to begin to build Tiddall almost 3 years ago, and we quit our jobs in late 2013 to begin to build Tiddall without any funding.  It was long and hard but we got through, and launched in April this year.

First offers of investment

During the process of building Tiddall we had applied for funding to help us speed things up. But during the wait for our application to be responded to, we had a change of mind. We decided it wasn’t time to ask for investment as things were too early-stage, and we all came to the agreement that if indeed we did get a response from anyone interested in investing in us, we would decline.

A few weeks went by, and then we had an email from three potential investors who were very keen on partnering up with us. But to do so, we had to give out a lot of equity to get their capital… just as we had assumed earlier. We were very hesitant to refuse the offer as it was tempting, but we stood our ground and decided not to take the offer.

Reasons for turning it down

We knew it was too early to raise money - we hadn’t even fully built the MVP (Minimum Viable Product) yet, and we weren’t sure if anyone would even use it. We knew that our solution was great, but we needed to prove it first. We didn’t want to shoot ourselves in the foot by giving so much equity away before we had given the product a chance to grow.

We calculated that, actually, it would only take us acquiring 1400 users to get that same capital which had been offered to us, and we didn’t want to regret making such a rushed decision so early on.

You hear about many startups raising huge amounts of capital even before they have begun anything, and it can make you feel like you have been left behind - but my advice to anyone in similar situations is to have the willpower to hold on just a little longer. If you can build the first iteration of the product without any other money but your own, always do this. This way you are in a better position to get a better deal, which in turn means you can raise a greater amount by giving away less equity.

A difficult decision

It was very hard to make the decision not to take the money. We had all quit our jobs. Our savings were running out, and we couldn’t do a lot of things people took for granted, like going out, going on holiday, buying new clothing every month, going to the cinema or going for dinner with your partner. We made a lot of sacrifices to bootstrap Tiddall. All I could do was eat, work and sleep. This was our routine for almost three years. So it was very hard to refuse that investment.  It seemed like a lifeline then, but we really believed in our idea and that it would work.

Alternative funding

We instead decided to raise the capital through Virgin StartUp, believing that we could quickly reach profitability following our launch and repay it all back. We choose that path because it would ensure we maintained 100% ownership until we were fully ready to raise capital. We strongly believed our market research was correct and that we were indeed onto something, and we had a huge list of early adopters who were very interested in the product, so were pretty confident that on our product launch we would get a good momentum. By holding on a little longer to reach a time when we had users and profitability would swing the board way back on our side when we wanted to raise capital in future. If a few investors were interested in our vision when there was no product, how much more so would they be when we could offer one which was profitable?

How it worked out

It was the best decision we could have made, to be honest. We are now growing at roughly 4% each week since our launch. We don’t a perfect product yet, but we will eventually. It has given us the confidence to know that we were right.  We still have 100% equity and we are on course to reach 45k monthly revenue hopefully end of September. We will only raise capital when we have fully reached the growth phase. 

Key things to consider

Every start up is different and so may have different scenarios to us. For example, if you are building an innovative hardware product but you are not skilled to produce it, it may be wise to seek funding at an early stage, because it might be the only way to build it. But if you are skilled in your field or you can build the first MVP by yourself or by getting a loan from the likes of Virgin StartUp, do that first.

Test your product out first and see how it performs. Are people using it the way you intended or are they using it in a different way?

Do as much as you can to get customers to try it, so you can get feedback. When you have managed to survive that journey of product /market fit, you will be in the command seat once more when it comes to raising capital. Contrast that with moving too early; you would be at the mercy of the investors. You might end up giving too much equity away, resulting in regrets down the line.

Be absolutely sure that raising capital is the right thing to do before you do it.  However, if you can wait longer, doing so, because that is where you really get the best deal and the best partners to help you take your business to the next level.

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