Almost every startup company will need some sort of external funding source to get going, but navigating the UK funding world can be quite difficult. Not only are there a lot of options that can seem almost identical, but there are many requirements and rules that can take some time to understand.
This article will hopefully get you started with exploring your different funding options, giving you the necessary information you will need to make the best decision for your startup, and providing a good basis for further research.
#1 – Crowdfunding
Crowdfunding involves asking a large group of people to donate or contribute small amounts of money, which will hopefully add up over time and help you reach your funding goal. These people can be practically anyone, from individuals wanting to support your startup to other businesses or organisations looking to invest in a promising venture.
There are a few different types of crowdfunding, which all work a little differently from each other. For example, some are regulated by the Financial Conduct Authority (FCA), while other types aren’t.
Both investment and loan-based crowdfunding are regulated by the FCA, as the individuals or businesses supplying the funding will receive interest or stakes in return. Most of the time, the funding suppliers will provide you with their terms, and some may not be as willing to negotiate them as others.
Donation and reward-based crowdfunding aren’t regulated by the FCA, and you are solely responsible for creating and negotiating the terms. They usually take place online, on platforms like Kickstarter or Crowdcube. Donation-based crowdfunding can simply consist of something called ‘good-will donations’, where individuals put money towards a cause without expecting anything in return. Reward-based crowdfunding, on the other hand, always promises something in return that’s linked to the project being supported.
One of the biggest risks associated with crowdfunding is not reaching your goal. Some people may demand their money back if the goal isn’t met, especially if that means they can’t receive a promised reward. Also, not everyone is keen to just put their money towards a cause that may never become successful, so convincing investors and businesses to crowdfund your startup may be very tricky.
You can check out the UK Crowdfunding Association’s website to learn more about crowdfunding.
#2 – Debt funding
Debt funding, or debt finance as it’s sometimes known, involves borrowing money to get your business started. This money can come from a range of different sources, including bank loans, startup loans, and online lenders.
Bank loans are the most well-known form of debt funding and are generally considered to be a quite safe option. Banks have to be transparent about any fees and the interest rates you’ll be paying, and they are usually much lower than what startup loans and online lenders will expect you to pay. However, bank loans can take a very long time to process, with requirements such as a detailed business plan, evidence of a successful trading history, and an almost spotless credit history making it much more difficult for newer businesses to access these funds.
Startup loans are funded by the UK government and have less restrictive requirements than bank loans. You can borrow up to £25,000, even if your business is completely new or has been trading for less than 2 years. While this amount may be more than enough for some, it may not cover everything if you’re not granted the maximum amount, so you may find yourself having to turn to other options alongside this loan.
Online lenders have the most flexible requirements, with some promising to process your application and allocate your funds within 24 hours. Many consider online lenders as a more modern and immediate alternative to traditional loans, with lower interest rates and higher approval chances. However, since online lenders are able to set their own lending policies, there is no guarantee that you will get the best offer possible – they can adjust the policy based on each case), targeted at small businesses and startup companies.
#3 – Incubators
In short, incubators are designed to help startup companies get on their feet by providing a physical workspace, training, and seed funding. While they may seem like the easiest funding option, incubators do come with potential risks.
These include hidden costs that may put you in more debt than you are prepared for, especially if your startup is still in its early days – some incubators may charge you additional fees if they’re still not sure whether your startup is worth the commitment. Also, the seed funding provided by incubators will usually be in exchange for equity in the company. This means that a percentage of your startup’s shares are given over to the incubator organisation.
If you want to look further into incubators, f6s offers some good resources. Don’t feel pressured by application deadlines or ‘too good to be true’ offers – take your time to research and evaluate whether an incubator is truly necessary for your startup.
#4 – Raising an angel round
Angel rounds or investors are a great option if your business is still in its early days, and is not eligible for a bank loan. You can get a pretty good deal out of angel rounds, though it can be quite competitive and daunting.
You’ll need to be able to successfully pitch your business idea in such a way that will inspire someone to invest their money in the venture. The more successful angel investors will have multiple companies competing for their funding, so you need to outshine your competition without making impossible promises – check out this blog post to learn the basics of a good business pitch: this is a good article on the principles of pitching.
Apart from pitching directly to angel investors, you can turn to companies or organisations to help fund and host your startup. They do everything from finding potential investors to coaching you on the angel round process, but they can charge a quite hefty fee for it all. Companies like Find Invest Grow promise to only charge you if your startup succeeds, and we recommend sticking to those types of companies if you can.
#5 – Raising a VC round
Venture capital rounds are investment funds that manage investors’ money, working for individuals looking to gain private equity stakes in startups. They’re often considered a high risk and high return opportunity, as they focus on startups that have great potential for both success and failure.
While nobody wants to admit that their startup may fail, VC rounds are your best bet if your startup has been rejected by other investors or loan providers for being too ‘high risk’. Most of the time, there won’t be any huge fees you’ll need to pay if your business ends up failing – investors are aware of the risk factor and are prepared to make a sacrifice.
However, the amount of money you will get from a VC round may be quite small in comparison to other options. VC investors put money towards multiple startups with the hopes of one succeeding, so they usually won’t be putting hundreds of thousands towards each and every startup.
If you’re interested in learning more about how VC rounds work, you can check out this article by Investopedia: It’s aimed mostly at American audiences, but it covers the basics pretty thoroughly and gives some great examples!
#6 – Government funding
Apart from the previously mentioned startup loan offered by the UK government, there is a huge selection of other government funding options. Below are just a few examples:
• R&D Tax Credits – This is a super reliable scheme that aims to help innovative startups that perform important research and development. It basically gives your startup a tax break by letting you reclaim up to 33% of your R&D costs, even if your startup ends up failing!
• Regional Growth Funds – This government funding aims to support projects that will provide lasting employment and contribute to positive economic growth within the UK. There are lots of different RGF programmes available, which cover many industries and business models. You can find a list of RGFs that are currently live on the UK government website.
• The Patent Box – This scheme allows some companies to pay reduced Corporate Tax on their profits, provided that they keep and commercialise intellectual property within the UK. While it may not be suitable for startups that haven’t been trading for long, it does provide a much-needed tax break for small and medium-sized businesses with big aspirations for the patents they use.
In conclusion, there are lots of different funding options for startups in the UK. Whether you’ve already been trading for some time, or you’re completely new to the startup world, there will always be some way for you to obtain the funding you need. We hope that this article has provided you with a good basis to continue your own research into startup funding!
Peter Azu is FI Group Managing Director. After 20 years as Tax Inspector at HMRC he has worked as an R&D Tax Specialist for several companies, accumulating 19 years of experience in the R&D tax incentives sector. He also sits on the Governments R&D Consultative Committee where he regularly meets with representatives from the Government, HMRC, and other industry leaders to both discuss and shape R&D policy in the UK.
This Is a $103 Billion Profit Opportunity
Investors in private startups pocketed a fortune last quarter…
According to a report released last week, they took home $103.9 billion.
That’s a record high — and as you’re about to learn, those profits are expected to keep flowing.
So today, I’ll show you why this is happening…
And then I’ll share two easy ways to get in on the action yourself.
How Private Investors Make Profits
Before I tell you how to take advantage of this profit window, let me back up for a moment…
Let me explain how investors in private startups make money.
Startup investors make money when a company they invested in has an “exit.” These exits happen in two main ways:
- When a startup gets acquired by a bigger company in an M&A transaction, or
- When the startup goes public in an IPO.
And as it turns out, Q3 of 2020 was a record-setting quarter for these exits…
A Record-Setting Quarter for Private Investors
The first half of the year was a disaster…
The coronavirus put a halt to everything, including exits.
But Q3 brought a massive uptick in activity.
For example, as you can see in the chart below (courtesy of PitchBook-NVCA Venture Monitor), exit value increased 292.5% versus Q3 2019.
That was the 2nd-highest quarterly total in PitchBook’s historical dataset, just behind Q2 2019.
What do all these exits mean for their investors?
They mean huge windfalls of profits!
(FYI, even when you factor in the winners and the losers, over the past 20 years, these exits have returned an average of 55% per year. At 55% per year, in 20 years, you could turn a tiny $500 investment into more than $3.2 million.)
Just six months ago, this sort of exit activity seemed impossible.
So what happened?
The 3 Reasons Behind These Profits
This burst of exit activity is due to three main reasons.
New Sectors Soaring: Covid-19 has given a boost not just to biotech, but to industries like Fintech, Edtech, and Telemedicine. The way we work, learn, and receive healthcare are changing — and innovative startups leading the charge are becoming valuable very quickly.
Macro Environment: Low interest rates and a booming stock market are giving investors confidence that innovative startups will command high prices as public companies.
SPACs: As noted earlier, M&A and IPOs are the two main ways that startups exit. But recently, a third way has gained in popularity: a “special purpose acquisition company,” or SPAC.
In Q3, public listings drove the spike in exits — IPOs like Snowflake (NYSE: SNOW), Asana (NYSE: ASAN), and Unity (NYSE: U).
The things is, as PitchBook explained, the strong performance of these stocks in the public markets will “likely drive more IPO” activity…
And for startup investors, it’ll drive more profits.
So — are you in?
Two Easy Ways to Get Started
Crowdability offers a multitude of free resources to make sure you see current startup deals that are available for investment…
And to make sure you know what to do once you find a deal you’re interested in.
For starters, look at our weekly “Deals” email. We send this out every Monday at 11am EST, and it contains a handful of new startup deals for you to explore.
Second, check out our free white papers like “Tips from the Pros.” These easy-to-read reports will teach you how to separate the good deals from the bad.
The profit window is now open — take advantage of it!
UK Fintech Modulr Reveals that its Dublin based Entity Is Now Licensed as EMI by Central Bank of Ireland
UK-based Modulr, a Payments as a Service API Platform for digital businesses, has revealed that its Dublin-based entity is now licensed as an electronic money institution (EMI) by the Central Bank of Ireland.
The Modulr team noted:
“This is an important step in enabling our European arm to provide efficient, scalable and reliable payment services to customers across the European Union.
As explained in a release, the European division of Modulr has been established to offer services to customers based in the European Union (EU). Modulr is focused on driving instant payments “expertise” into the Eurozone, in order to improve how wholesale and commercial payments are processed.
The Fintech firm provides payments infrastructure that’s used by established companies such as Sage, Revolut, Mode and Iwoca.
As stated in the announcement:
“Following strong business growth in the UK over the past four years, the newly granted EMI license will enable [Modulr] to offer [various] payments products, including its award-winning payments platform, through its powerful API to EU markets.”
Modulr also brings its expertise of real-time payments to SEPA Instant, which is the Euro’s instant payments scheme. As noted in the release, Modulr’s experience with Faster Payments will help it “unlock the potential” of the new scheme by offering convenient access for European software firms, merchants, and specialist banks.
The announcement also mentioned that the “true” potential of a digital API-based alternative to commercial payments will “rely upon an agile and efficient ‘behind the scenes’ payments process, which has historically been inaccessible and unaffordable to SMEs and enterprise alike.” As explained by the Modulr team, this information “comes from soon to be published research commissioned by Modulr, which reveals contemporary insight … into the hard cost of payment processes [and] the hidden impact on customer experience as well.”
Myles Stephenson, CEO at Modulr, stated:
“The opportunity for a digital alternative to commercial and wholesale transaction banking is significant as software businesses across multiple industry sectors are identifying the need to deliver new functionality and efficiencies to their customers by embedding payments in customer journeys. We plan to build a truly digital, frictionless payments infrastructure for software platform partners to provide new payment experiences to more than 500m people.”
Stephenson believes that his team has the experience and expertise in digital payments and API integration needed to offer key services to European businesses that are interested in streamlining how they make, receive and manage payments.
John Irwin, General Manager, Modulr Europe, remarked:
“Our digital platform and experience can transform the payments business. For too long, European payments have relied on the same technologies.”
Modulr has reportedly moved more than £40bn for clients such as Sage, Revolut, and Paxport through its platform which has “an uptime of 99.999%.”
Modulr offers this scale, reliability, and quality of service by investing in its own financial access and “achieving principal and direct access to critical payments.”
In September 2020, Modulr became the principal issuing member of Mastercard. The company had said that it would be offering more seamless digital payments solutions.
American Express and Coupa to Expand Partnership to Bring Virtual Card Payments to US Markets
According to a release, the American Express virtual Card payment option within Coupa Pay is now available globally, allowing companies to pay “smarter and simpler.”
Coupa (NASDAQ: COUP) and American Express had teamed up last year in order to provide better payment options. The release noted that they’re now ready to take their partnership to the “next level” as US-based customers now have the option to use American Express virtual Cards as a payment method with Coupa’s business-to-business (B2B) payments platform, called Coupa Pay.
As confirmed in the announcement, American Express virtual Cards are currently available in the UK and Australia. These payment options aim to effectively replace “outdated, complex, and inefficient payment processes” for businesses across the globe.
Customers are able to streamline how they pay their suppliers for all spend that’s directed or processed through the Coupa Business Spend Management (BSM) Platform.
The announcement further noted:
“As many companies continue to accommodate largely remote workforces for the foreseeable future, the expansion into the US continues to help meet the demand of customers who need a virtual way to pay suppliers and ensure their business continues to be operational.”
JR Robertson, vice president of Coupa Pay at Coupa, said that the pandemic has led to “widespread work from home policies,” which means that fragmented and manual business payment processes are not a legitimate alternative in a post COVID world.
“With Coupa Pay, Coupa and American Express are making it easier for our joint U.S. customers to thrive in this challenging environment by empowering them to pay using virtual Card technology.”
Trina Dutta, vice president and general manager of B2B Payments Automation, Global Commercial Services at American Express, remarked:
“By integrating American Express virtual Card capabilities into the unified buyer and supplier experience of Coupa’s … BSM platform, we’re addressing our customers’ need to digitize payments and thereby (potentially) becoming more essential to their operational needs.”
Beyond Limits and The Carnrite Group Create Alliance to Drive AI Innovation in Oil & Gas, Utilities, Power and Industrial Sectors.
Ball Corporation and Kroenke Sports & Entertainment Announce Global Partnership to Advance Sustainability in Sports and Entertainment Through Aluminum Beverage Packaging, Improved Recycling Programs and Consumer Education
St. James Gold Announces Private Placement
Worldwide Water and Wastewater Treatment Equipment Industry to 2027 – Featuring SUEZ, Ecolab & DuPont Among Others
Automotive Refinish Coatings Market Size Worth USD 11.69 Billion by 2027 | CAGR of 3.7%: Emergen Research
Captain Toonhead vs the Punks from Outer Space Unleashes FPS Tower Defense in 2021
Dorian LPG Ltd Provides Update for the Second Quarter 2021 and Announces Second Quarter 2021 Earnings and Conference Call Date
SK Innovation Declares Ambition to ‘Lead the Efforts for Battery Safety, Charging Speed and Driving Range’ at InterBattery 2020
Canada Nickel Makes Third New Discovery at Crawford Nickel-Cobalt Sulphide Project
AEP Reports Strong Third-Quarter 2020 Earnings
Eyeing EU Banks, Hex Trust Teams With SIA on Crypto Custody
Collider Labs Raises $1M to Invest in Blockchain Startups
Voyager Agrees to Buy LGO Markets and Merge 2 Firms’ Tokens
Business Enablement By Way Of The BISO
The Top eCommerce Companies in October, According to eCommerce…
Footwear Manufacturer Otabo Steps Up Digital Strategy with Centric…
Cloud Sales Veterans Release Essential Read for B2B Salespeople
LaserShip Announces Its Time Of Need Philanthropic Program
cogu joins MIBR as manager and coach
Strategic Resources Files Mustavaara Technical Report
Ur-Energy Announces Extension of State Bond Loan and Provides Update
Pettit Marine Paint Develops the Most Effective Anti-fouling Paint to Hit the Market in Many Years – ODYSSEY® TRITON
Core Lab Reports Third Quarter 2020 Results From Continuing Operations:
Pelosi, Kudlow Signal Market-Moving US Stimulus May Wait Till After Election: Report
A Difference-Making Disinfectant
Market Wrap: PayPal Powers Bitcoin Past $12.8K as Ether Dominance Drops
How Car Tires Are Manufactured
5 Real World Applications of the Doppler Effect
Join Hands with Instagram’s New Algorithm to Boost Your Business’s User Engagement
What the History of Headphones Says About the Internet’s Future
Villanova University to Send Private Ethereum Blockchain Into Space to Test Inter-Satellite Communication
Baby Steps or Handcuffs? Crypto Pros Assess PayPal’s Bitcoin Play
BioMicrobics Acclaimed by Frost & Sullivan for Its Continuous Innovation-led Growth in the Water and Wastewater Treatment Market
Crypto Options Exchange Deribit to Require ID Verification for All Users by Year End: Report
SME Education Foundation Seeks Industry Involvement for Unadilla Valley High School Initiative to Create STEM Opportunities for Students
Verisem Acquires State-of-the-Art Vegetable Seed Processing Facility, Further Enhancing Capabilities
Global Synthetic and Bio Based Polypropylene Market 2020-2026 Growing Demand in the Automotive Industries
AI-Driven Dynamic Filmmaking is the Future
Growing Concerns around Global Warming Are Set to Drive Hypercar Market Forward: TMR
Angry Birds VR and Acron: Attack of the Squirrels Gear up for Halloween
Techcrunch5 days ago
Original Content podcast: It’s hard to resist the silliness of ‘Emily in Paris’
Gaming1 week ago
‘Call of Duty: Mobile’ Season 11 Anniversary Update Is Out Now with a New Battle Pass Coming Soon, New Maps, XP Card Changes, and a Lot More
Startups5 days ago
Solve the ‘dead equity’ problem with a longer founder vesting schedule
Startups5 days ago
Three views on the future of media startups
AI6 days ago
How AI Revolutionize the Way Video Games Developed and Played
Startups5 days ago
Pear hosted its invite-only demo day online this year; here’s what you might have missed
AR/VR1 week ago
Review: Oculus Quest 2
Startups5 days ago
VCs reload ahead of the election as unicorns power ahead