How to extend your startup funding runway

If you’re the founder of a UK startup funded by venture capital (VC), you need to think beyond the here and now. It’s essential to plan for the long-term, which means thinking about your funding runway - and how you’ll transition into a self-funding operation in the future.

In this guide, we’ll look at what a startup funding runway is, along with tips and strategies to extend it for as long as possible. This includes understanding your cash flow, focusing on profitability, seeking non-dilutive funding sources and improving operational efficiency.

And while you’re focusing on business finances, we’ll take a quick look at a fantastic solution for fast-growing startups with an eye on global expansion - Wise Business.

💡 Learn more about Wise Business

What is a startup funding runway?

A startup funding “runway” is the amount of time a business can operate before it either needs more capital or it becomes profitable.

When venture capital is involved, it's crucial for startups to put plans in place to extend their runway as much as possible. And this is also while building a sustainable and scalable business.

Get the timing right and your business can hit key milestones and attract future funding rounds without facing a cash crisis.

6 strategies to extend your startup funding runway

Now, let’s dive right into tips and strategies to help you extend your startup funding runway, starting with looking inward at your company’s finances.

1. Understand your cash flow and budgeting

A solid understanding of your company’s cash flow is the foundation for effectively managing your startup’s runway. You need to know exactly how much capital is coming in, how much is going out, and where your money is being spent.

Start by calculating your burn rate, which is the amount of capital you’re spending each month. This is particularly important in the UK as the cost of doing business can vary regionally, and external factors such as currency fluctuations and economic shifts can impact your figures.

Once you know your burn rate, you can calculate your runway - by dividing available capital by monthly burn rate. This helps you get a picture of how long you can operate before needing further funding or achieving profitability.

Armed with these figures, it's time to optimise your budget. This means implementing measures such as:

• Cutting non-essential expenses
• Renegotiating contracts
• Seeking out cost-effective suppliers or partners
• Moving to a more affordable location (or shifting to flexible office space) if your premises costs are disproportionately high

Scenario planning is another effective tool for managing your runway. This involves creating multiple financial forecasts based on best-case, worst-case, and likely scenarios which may affect your business. This can help you prepare for unexpected events, such as slower-than-average sales or rising costs. This will give you the flexibility to make smarter decisions about how to allocate your funds.

2. Focus on profitability milestones

While growth is essential for any startup, achieving early profitability should also be a key focus. Profitability not only ensures the sustainability of your business, but also shows investors that you are effectively managing your resources.

With this in mind, it’s a smart move to start identifying paths to revenue generation as early as possible. Even if your products or services aren’t market-ready, you may be able to explore ways to monetise them - or speed up the route to market if you can.

You might also want to look for ways to diversify your income streams, even if this is a plan for the future. For example, you may be able to offer consulting services, a wider product range or a subscription model.

Another key focus should be customer retention, which can be a key driver of profitability. As every successful business owner knows, it’s far more cost-effective to keep existing customers than to acquire new ones.

To boost retention, look for ways to offer exceptional customer service, create loyalty programs or explore upselling or cross-selling opportunities. These strategies can all help to increase the lifetime value of each customer, which ultimately helps to extend your runway.

3. Align with your VC investor’s interests

One of the most crucial factors which will affect your funding runway is your relationship with your venture capital investors.

Remember that VCs not only provide funding, but also offer expertise, resources and networks that can accelerate your growth. It’s crucial to maintain open and transparent communication with them, in order to build and nurture a strong relationship. And importantly, it can help ensure that both parties are aligned on goals and expectations.

Start by keeping your investors updated on key metrics, such as cash flow, runway and your progress towards profitability. Transparency will build trust and increase the likelihood of securing follow-on funding when you need it.

VCs are particularly focused on startups that show progress toward scalability, and having regular check-ins or milestone reports can demonstrate your commitment to this growth.

It’s also vital to understand the timeline and expectations of your investors. Most investors expect startups to show significant growth within a certain timeframe, so you need to make sure you can hit these targets and while avoiding running out of funds too quickly.

4. Explore non-dilutive funding sources

Non-dilutive funding options are a great way to extend your runway without giving away equity in your startup. If you’re new to the concept, this means securing funding without surrendering an equity stake.

Government grants are one of the most popular sources of non-dilutive funding. In the UK, you’ll find a range of government grants for innovation, research and development (R&D), and expansion into international markets.

A good place to contact is Innovate UK, the UK's national innovation agency and a major source of funding and support for startups.

Read more about Business Grants in the UK in our complete guide.

Crowdfunding is another option. Websites like Crowdcube and Seedrs allow startups to raise capital from individual investors, often in exchange for rewards or early access to products, without giving up equity. You’ll just need to make sure you keep any VC investors in the loop about your plans.

Strategic partnerships can also serve as non-dilutive funding sources. You may be able to collaborate with other startups or even larger companies within your sector, and benefit from shared resources, co-marketing opportunities and access to new revenue streams.

This could give you the financial boost you need to extend your runway while maintaining full control of your business.

5. Be strategic about hiring and scaling

Hiring is one of the largest expenses for any startup, and there’s always the risk of going too far, too soon.

While hiring talented individuals is crucial for growth, being strategic about when and who you hire can help keep costs under control. Many startups face challenges when scaling too quickly, hiring too many people before product-market fit has been fully established.

Rather than hiring full-time employees for every role, you might want to consider using contractors or freelancers for certain tasks. For example, marketing, design or software development. Not only can this save you money, but it also gives you flexibility in scaling your team as your business needs evolve.

When it comes to scaling, it’s recommended to take a cautious, gradual approach. Instead of scaling up rapidly based on early success, make sure that you’re responding to actual customer demand.

Expanding your operations too quickly can lead to over-investment in infrastructure, which may cause you to burn through your funding too quickly. So before large-scale hiring or expansion, focus on refining your product, solidifying your customer base and proving your business model really works.

6. Improve operational efficiency

Last but not least, you might want to look into optimising your operations. This is actually one of the most effective ways to stretch your runway.

By reducing waste and increasing efficiency, you can lower costs and free up capital for reinvestment into your business.

But where to start? A good jumping off point is to evaluate your existing processes systematically, identifying inefficiencies and potential areas for improvement. Could AI and automation help you to save time on repetitive tasks, and save money too?

Technology can help in other ways too. For example, investing in software for accounting, customer relationship management (CRM) or project management can save both time and money.

Adopting lean methodologies can also help to streamline your business operations. This includes regularly reviewing your key performance indicators (KPIs) to ensure that every decision and expense is contributing to measurable business outcomes.

Grow your company and go global with Wise Business

While you’re researching funding options for your startup or small business, it’s also worth making sure you’re set up with the right business account.

Open a Wise Business account and you can hold and exchange 40+ currencies at once.

You can send fast, secure payments to 140+ countries, and get account details to get paid in 8+ currencies like a local.

Whenever you need to send, spend or exchange foreign currencies, you’ll benefit from the mid-market exchange rate, with low, transparent fees.

You’ll also benefit from all of these features with Wise Business:

• No ongoing fees, minimum balance requirements or foreign transaction fees
• Debit and expense cards for you and your team, which you can use in 150+ countries
• Multi-user access for team members, with ways to control and manage permissions
• Pay up to 1,000 people at once with the Wise batch payments feature
• Integrate with your favourite cloud accounting solutions
• Use the powerful Wise API for automation and streamlining workflow
• Take advantage of Wise Interest to make your funds work harder when you’re not using them (capital at risk).

With a truly global account, you’ll be all set to grow your business worldwide.

Get started with Wise Business 🚀

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After reading this, you should have some food for thought on how to extend your startup funding runway. We’ve run through a few key strategies, which should help your company to avoid a cashflow crisis and scale up in line with your goals - good luck!

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