Managing Startup Money, How to Manage Money Effectively in Your Startup?

Ca Ankit Rungta

May 05th, 2016

A couple of days ago, I met one of my clients who had raised $20 million in his last round of funding.

Now this guy, always inspires me to do something of my own! After our regular work discussion, we put on our thinking caps to have a serious brainstorming session.

Question: Why do you think about money when you have raised such a massive round of fund?

His response:

I'll never forget the days when we had only Rs 1 lakh to start our product. The idea was vague and the business was new. One of the brilliant financial adviser we met during the early days advised us to get a company incorporated, proper office space, get every possible tax registrations, trademark registrations, etc. the entire cost of all these came to minimum Rs 2.5 lakhs.

"That's traditional business model and we aren't one of those!"

"Beta, you don't know anything about business. You need our guidance and let me handle these things. There are consequences that will disrupt your business and day to day affairs", he said making it sound like really important stuff.

This response made me think that we need more funds as we had only Rs 1 lakh. This will not help us even survive for even 6 months! We were almost about to abandon the project when this though hit me hard. He was right, but so was I. This isn't a traditional business format!

  1. We can work on a rent free space (my home).
  2. We would need an organisational structure (preferably private limited company) only when we start to apply for registration, start marketing or selling the product.
  3. We need to focus conduct market survey, build the product and to improve it continuously.
  4. It's better to listen to your heart than to too many brilliant people.
  5. Money, the most important resource is very limited and the work of the real entrepreneur is to deliver the result within the confines of this constraint. Spend very very judiciously."

Amazingly, these are not just words to inspire but a core principle to be followed by all the entrepreneurs while starting at the early ideation stage.