One of the first lessons that we learned at CityFALCON was that it is essential to stay as lean as possible during the fundraising stage. This enables you to keep fundraising to a bare minimum, and ensure that you will not dilute the company too much in the early stages of development. This strategy is also particularly relevant when you are testing hypotheses around which your business will be built.
We have made several decisions of which we are quite proud, and which in retrospect look particularly sensible. But one of the very best was utilising Level39’s drop-in service instead of renting offices / desks. Just to put this into perspective for you, the rent we saved from this was the equivalent of £36K.
We’re able to further save office space by incentivising staff to work from home, using Skype and other online collaboration tools effectively. Not only does this save us money, but it helps us attract talent, as people appreciate this flexible and non-authoritarian approach to working. Another way that we save money is to hire rooms only for important meetings. This can be achieved at as small a cost as £10 per hour; saving us potentially thousands of pounds over a longer period of time.
Outsourcing has also been a valuable way of making savings. In particular, we have managed to recruit several outstanding developers from the Ukraine. This for example enables us to hire to senior developers for the same price as paying one junior developer in London. CityFALCON has thus been able to acquire a team of 4 senior developers, 2 junior developers, 1 front-end developer-cum designer and 1 QA professional all based in the Ukraine. Hiring the same team in the UK would have costed us £400K annually, and by outsourcing we have a pretty massive saving of £225K per annum.
Continuing with this careful recruitment policy, we have also hired some very smart and talented young people, and invested in training them up to the standard we require, as opposed to hiring experienced individuals with large salary demands. Although this necessitates handholding in some cases, the enthusiasm that they bring to the table unquestionably compensates for this. We also estimate that we have saved around £30,000 per annum by operating this recruitment policy.
Ability to code (£20K+)
I’m also particularly thankful that I made the decision to learn how to code. This was a pretty big undertaking, and I will concede that it was a little bit daunting at times, but the benefits of this have been multifarious. Aside from the obvious economic benefit of not needing to hire a coder in the first place, understanding technical details related to the business has helped save thousands of pounds in feedback loops, not to mention ongoing development costs. In general terms, it has also been a valuable string to my bow, and one that has continually helped the business.
Legal and tax documentation(£5K+)
Another good money saver for City Falcon was the simple fundraising documentation which we raised at the time of our fundraising drive. This encompassed a letter of application and articles of association, while we shied away from unnecessary documentation such as term sheets. We estimate that this saved us in the region of £2,000; certainly not money to be sniffed at.
One of the key aspects to a start-up in my opinion is refusing to feel daunted by anything that you encounter. With this in mind, all SEIS advance assurance and post-investment formalities were carried out by myself, although I did seek guidance from our lawyer.
It is worth noting with regards to this process that HMRC was actually extremely helpful. It is easy to view the taxman as the big, bad wolf, but ultimately they are there to help and assist businesses as much as they are there to acquire taxation from them. It is notable with regard to this process that all the requisite forms to fill in were also very straightforward.
It can be argued that this segment of the business should not be considered a core aspect, and that it is wise to outsource it completely. But we would argue that it is necessary to provide this information to your lawyer and accountant anyway, which would ultimately take about the same amount of time.
Throughout all of the start-up process, we attempted to collaborate with the Companies House in order to keep costs down. It should be noted, though, that it was necessary for us to seek further advice from lawyers, as the Companies House still needs to improve the quality of information and procedures for start-ups, in our opinion.
We have also gone to great lengths to ensure that we keep our legal costs as low as possible. Firstly, we agreed a series of fixed-price tasks with our legal team. And secondly, we utilised internal resources to create initial versions of documents, and then subsequently have them reviewed by our lawyer. This turns out to be a lot more cost-effective than asking a legal professional to draft everything from scratch, although we did make an exception with regard to the terms and conditions of our website.
It is important to emphasise that compromise and corner cutting must never take place with regard to important legal issues, so for example lawyers do all of our work related to customer contracts. Nonetheless, our frugal policy in this area possibly saves us as much as £5,000 per annum.
Freebies, discounts, competitions (£30K+)
Other policies that we have put into place include utilising online resources provided by other founders in order to improve our efficiency and reducing costs in many cases. We frequently apply for freebies and competitions, and by doing this managed to acquire $100,000 from Google towards the cost of our servers. We were also provided with a free booth at two reputed trade conferences, and collectively these two fortunate offers were probably worth the equivalent of £30K to us.
At CityFALCON we have learned to value thrift very highly. We take full advantage of free time provided by lawyers, accountants, and service providers. We managed to avoid significant dilution in stakes early on at low valuations.
And above all else, we simply question spending every penny twice. By making this ethos central to our operation, we have established City Falcon as a very successful start-up in a short period of time, and have huge plans for the business in the near future.