RecruitHub - Most-asked start-up questions of 2023
Funding & finance

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Do I need an investor?

For most start-up agency founders, an investor is a ‘want’ rather than a ‘need’.

Why?
With organic launch costs so achievable, most recruiters who are determined to launch can find a way to do so by combining personal savings (commissions + bonus payments) with debt financing (e.g. up to £20,000 in business start-up loans, to be paid back at attractive rates over several years).
Investment is usually a better match for:
Founders who have ambitious growth plans to scale headcount immediately (from day one), or
Founders with high personal outgoings (e.g. mortgage, family costs) who either don’t have the personal savings or the risk tolerance to launch with their own funds, or
Founders who really value the ongoing strategic contribution the investor will make to their business
Some high-level advice at the end of the phone (or back office support) isn’t usually worth a large % of your company!

Why not get investment, if it’s available?

There’s nothing stopping founders from raising investment at start-up stage, and many do.
But it’s important to consider a few things:
The equity you give up at the start is equity you can’t give up later on.
Investors who take a stake in your agency at the beginning immediately reduce the size of your remaining ‘pie’.
While this may seem a good idea at the outset, it can become difficult if you need to distribute equity further down the line - e.g. to raise additional funding, or to incentivise key team members to join / stay with the firm.
If you have the option to launch without giving away significant equity, it’s often a good idea.
Equity feels ‘cheap’ at the beginning of your business journey, but ‘expensive’ later on.
10, 20 or even 50% of your start-up may not feel like much when you launch.
But by the time your company is generating significant profit, sharing those profits with investors can be painful.
It can be even more painful if you ever sell the business.

Whenever you sell equity in your business, a valuation is placed on your company to decide the price of the shares.

At launch, your valuation is the lowest it’s ever likely to be.

That means mathematically, it’s the worst time to give up equity (unless you absolutely have to).
Investors are taking a huge risk in a business ‘idea’ - with no customers or track record.
Even just a short period down the line, the story changes - you’ll have customers, sales, performance history, a growing brand and something for investors to buy into...
Raising the same amount on these new terms can be a game-changer with regard to how much equity you need to give up.
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Considering investment?

Around 20% of start-ups on the RecruitHub platform opt to launch with equity investment, sourced by our team.
We work to ensure all founders majority own their companies (typically 80%+) and have the freedom to run their agencies as they wish.
For more information, .

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