The biggest challenges founders face

Starting a company is difficult. We wanted to know what exactly it is that is challenging for founders. In a survey of 110 founders in Germany, we gathered insights regarding needs and motives with regard to building and financing their ventures.

Out of 110 founders, 19% were female founders, 56% first-time founders, and 57% of founders have 5+ years of working experience prior to starting their company. 80% of the start-ups are 2 years and younger. You can download the full results report here.

Strong desire to be independent

Founders “want freedom”, a “desire to work without company politics”, or “leave their role as an employee”  – of 51 answers, almost two-thirds express their desire to be independent. Another driving force is to improve the status quo. 30% of the respondents report that they want to use their “entrepreneurial ambition to build something successfully” or “want to change the world”.

Challenges are universal

While building their companies, founders face a multitude of challenges. Almost equally tough are:

• Build the company with limited financial resources (68%)
• Focus on the right levers (68%)
• Win customers (67%)

At a closer look, female founders highlight the struggle to focus (81%) compared to male founders (66%). First-time founders struggle more when it comes to customer acquisition (73%). Also, we observe that serial entrepreneurs seem to struggle less in general.

If you want to know more about where founders are struggling you can download the full report here.

Financing is a necessary evil, but transparency needs improvement

Although 63% of founders try to finance the company with their own financial resources everyone has some kind of additional funding. The preferred sources for additional funding are Business Angels (24%), Family & Friends (24%), and grants (24%). Venture Capital only accounts for 11% of the funding, which could be explained by the fact that mostly early-stage startups (2 years or younger), participated in the survey.

Especially female entrepreneurs make greater use of grants since 48% reported that they use it to finance their venture. Serial entrepreneurs rely both on their own savings (72%) and financing the company from cash flows (28%).

When it comes to financing their ventures, founders express a strong desire to keep control of their company - 92% state that this is important to them.

Also, it became clear that across all founder types the financing market lacks transparency:

• 89% would like to get insights about previous experiences founders made with potential investors
• 86% want more transparency regarding access to potential investors - it seems that a comprehensive overview of the German funding ecosystem is missing

Founders seek help where they need it

When asked in which areas external support would be the most helpful the top categories are:

• Marketing (53%)
• Legal (45%)
• Sales (45%)

Unsurprisingly, first-time entrepreneurs wish for help more often than serial entrepreneurs. Also, women seem to be more likely to receive help, since they reported higher levels across the categories.

We also wanted to know, in which areas founder actually seek help:

• Funding (49%)
• Customer acquisition (49%)
• Contact to investors (38%)

At a glance, this is more or less in line with the biggest challenges founders face. Remember, the number one challenge founders face is to build a company with limited financial resources. However, one aspect is striking: While 68% admit that focus is an issue, only 22% (not in the chart below)  actively seek help on this matter.

Entrepreneurs help entrepreneurs

We believe that this is where investors with entrepreneurial background are most helpful.

Our team has altogether built over 20 businesses and experienced companies in all stages from scratch to scaling, some of them even bootstrapped. Hence, we know from first-hand experience about the challenges one has to overcome.

At better ventures, we invest in early-stage founders who want to change the world for the better. If you are starting a company, or if you consider doing so, feel free to reach out to us. We might be a good partner to get you started.