Should startups avoid funding? This studio thinks that is not so Strange

/// Should startups avoid funding? This studio thinks that is not so Strange

February 19, 2013  |  Blog

Where do startups go after they’ve been incubated? Keeping a company afloat once it graduates from an accelerator is not easy and raising funds without the constant updates and advice on tap from mentors is no mean feat.

Earlier today we covered the launch of Pretty IP, an experiment that turns your IP into colour bars. It’s the work of Strange, a brand new agency that also launched today and the team members are graduates of the Wayra London Academy.

Browse around the Strange studio site and you’ll find the mission statement confirming that they are making rapid prototypes conceiving and creating digital products. That is as you might expect from a site launch, but one section of the launch announcement is intriguing.

We setup Strange because we’re fed up with ‘startup culture’ and the financial mechanisms associated with it. We want to build transformational technologies and solve real world problems and sharing our ability to do this with clients is best way for us to achieve this goal.

Those are some hard words, startup culture can be very bouyant and supportive for many small companies so The Next Web set about asking Mat Munro, Principle at Strange what has made them so tired when it comes to startup culture and its financial processes.

“We’ve been picking up this sentiment recently, particularly in relation to European statups, that there’s this lack of ambition,” he says. “A feeling that instead of building web apps we should be developing these world-changing, transformational technologies. The thing is, we don’t think that’s down to a lack of ambition on the part of the founders, we think it’s related to the way that startups secure their external funding. Particularly if you are a first time entrepreneur or you’re a pre-success entrepreneur. It’s a different story for the Elon Musks of the world.”

Munro says that unless you are a digital rock star, it’s hard to get funding, but if you are that rock star, you probably won’t need it. It’s a tricky balance and one that he believes leads to smaller visions. “The truth is that transformational technology takes a lot of time and by extension, money, to create,” he told The Next Web. “That’s why so many web apps do get funded initially. Because if you get a talented team it’s pretty quick and easy for them to put something together that they can then take to investors and say ‘give me fifty, one hundred, one hundred and fifty thousand to explore this idea and see if it goes somewhere’. We think that this lack of ambitious startups is a symptom of unambitious investors.”

The practicalities of working with investors can be a trial for startups. Getting the right relationship together and not losing your soul in the contracts is a new skill for many small companies. But Munro is clear about how he sees the aims of those who carry the cash.

“We recognise that investors are in this to make money,” he says. “They’re not here to sponsor the creation of transformational companies. But as a team, those are the kinds of companies we really want to build. So that’s why we set up Strange. The idea being that we can take the money we make from client work and use it to fund our own runways and prioritize developments that we think are important.”

Remember your roots

Although Strange is hoping to think big, it will not be forgetting where it came from. “We’ll still build web apps,” says Munro. “The Pretty IP site we released today is a perfect example. That’s just something that we put together in a few hours over an afternoon because we thought it was interesting and it warranted exploration. What we really hope is that the financial freedom we will get through Strange will allow us to experiment with ideas and technology, particularly in the early stages that external investors would never back, unless you have a track record of colossal success, in which case external investment almost becomes moot. You can fund things yourself.”

So, should startups strive to be more independent? Along with the cash, a lot of good advice and mentoring can support a small business. Munro says that funding is very appealing for a number of reasons. “There’s something very intoxicating about getting hold of somebody else’s money and use it to develop something that you are passionate about. I think that there’s still a place for that. But I think that it’s almost a false freedom, as you are then dependent upon there being someone with money for you at whatever stage you are at who will understand what you want to do.”

He continues, “If you have the financial freedom to choose the stage at which you seek external funding instead of external funding being something that you need every step along the way, it gives you the opportunity to develop some ideas hat would otherwise be ignored or seen as too complicated or risky.”

So what’s the beef? Are these guys cross because they feel they missed out on funding? The Strange team created Pollarize, the A/B testing app which emerged from a Startup Weekend to develop through the Wayra Academy. Munro is pragmatic about the funding options for that particular work.

“We have sought funding to take Pollarize further, and if it had been the right money from the right people we would have taken it because that’s still an idea that we believe in. This isn’t sour grapes, it’s not that we’ve been grumbling at each other over a series of pints and though ‘we’ve not got lucky so screw it’. We’re not saying that what we are doing is the answer either. This is how we want to move forward and for use we think that this can work and we can sustainably innovate without being dependent upon somebody else to give us a yes or no.”

It is said that everyone has a price though, is Strange open to future funding? “Potentially,” says Munro. “Depending on the terms. I think there’s a difference there and the important distinction is that would be somebody approaching us. We wouldn’t have gone out there seeking investment, that would be someone who is interested in us.”

“We planned Strange and the idea is to be a self-sustaining company,” he says. “So if investors came in and we thought we could accelerate the speed at which we could attain our goals, then its something we would look at.”

Strange is a reaction to having been through a startup cycle and wanting to come up with a better way of doing things without being depending on an authority. As Munro puts it, “Someone in a suit who doesn’t always get it, doing a ‘Julius Caesar’, giving you the thumbs up or down.”

Safety in numbers

Munro observes that there are many digital agencies that use client work to explore more interesting and fun experiments. “They use the prestige to innovate and develop independent products,” he says. “We think that it’s a smart way of doing business. Our ideal position would be to get to the point where our revenue stream might be split 50/50 from client work and our own IP revenue.

A few things that have made it easier for Strange to emerge as a studio from an accelerator. The team is a comparatively large one that wants to stick together and it has a variation of skills. Munro says that it can be a tough decision for startups to take the same route. “With the startup ecosystem, you get so many ‘No’s and so many knock-backs and there is a seemingly endless supply of people willing to tell you that what you are working on is rubbish and that it’s not going to work, but you need to believe. You need to unconditionally believe that what you are working on is going to success and if you do that then it’s a hard decision to say you should divide your time,” he explains.

“You almost feel as though you have to work on one thing a hundred per cent and you’ll prove to people that there is the potential. You can’t blame people for going whole hog at what they are working on. But every now and again you’ll get an opportunity to step back a little bit and reevaluate and assess. It happens that we came up against one of those barriers. For us the practicalities of ‘keeping the band together’ and surviving, outweigh the blind fanaticism we have for the project we are working on.”

The studio has already been approached by interested parties and this being its zero day, the team has an open door to those looking to work with them. Time will tell if this new firm will find the 50/50 split it is looking for. In the meantime, having an experienced startup for hire might help them to at least create a few new things on their way to quite different technologies.

Link: Should startups avoid funding? This studio thinks that is not so Strange

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