Getting your business ideas funded (without a loan)
Funding for business ideas can take a range of forms, however, the more traditional methods such as business loans and mortgaging your house are dying. In a world where innovation and technology are thriving, so have the methods for bringing in cash to support your ideas. It’s never been easier to plant the seed of your company and this article explains exactly how to do that:
To become an entrepreneur is no easy feat and funding your idea by yourself is one of the many challenges. Bootstrapping is the process of using your capital and funds to start a business. Whether that’s personal savings, income from another job or some money you’ve found behind the sofa, the concept is of using your funds.
Proven to be extremely rewarding, bootstrapping often allows entrepreneurs to retain full ownership and shares of their business. This is extremely valuable when it comes to decision making and the ability to make judgements without any third-party influence.
For any new entrepreneur, it’s not uncommon to use bootstrapping to help find your feet. Often, founders will bootstrap to a stage where they can then bring on a strategic investor to take them to the next level. This way, any early decisions about the company’s progress can be made by the founder, and the investor used to accelerate their growth.
However, some may never need the investment. You may have heard of the extremely successful company Mailchimp which have recently been acquired by Intuit for $12Bn. Mailchimp took no outside funding and grew only from bootstrapped money.
However, it certainly doesn’t come without its drawbacks. With start-up failure rates around 90%, financial difficulties are often the cause. Without any cash flow, bootstrapped companies often run out of funding very quickly, making survival much more strenuous.
With more and more start-ups being born every day, so are the number of competitors. A bootstrapped company may not be able to introduce resources and innovation where an already established company, with capital, would be able to. For this reason, it becomes much harder to compete and long-term bootstrapping may not be for everyone.
Beta Booster loves grants! A lot of people have divided opinions when it comes to using grants, but from our own experiences, we can truly say that in the early stages, grants are our favourite form of funding.
They allow you to make quick and easy decisions, whilst bringing in resources that may be out of reach if you’re bootstrapping. Grants can range from £500 up to £25 Million, but for early-stage companies, it’s unlikely that you’ll see much more than £10,000-£15,000 (which we aren’t complaining about!)
Grants are given out by organisations to help them achieve certain agendas. Whether that’s Innovate UK supporting a young entrepreneur or the UK government helping businesses during a pandemic, grants are available for a range of scenarios. With so many available, you won’t struggle to find one where you meet the criteria to apply.
Without having to sacrifice any equity, interest payments or resources, grants are often called the perfect form of funding to help you get started.
However, we aren’t going to sit here and pretend that grants are the easiest things in the world to get. Often, grants are received through entering competitions and the ability to prove that your business is supporting the aims of the issuing organisation.
Companies like Innovate UK, KTN and Santander are constantly pushing out new competitions and challenges. With the amount of publicity high and an ever-increasing number of applicants, the chances of making it to the end seem to be decreasing.
This being said, you’ll likely get through to different rounds on applications, and once you get the hang of writing them, become a lot more successful. So, if time isn’t a problem and you don’t mind making applications for a couple of hours a week, grants (aka free money) can prove to be pivotal for your journey.
If you’ve found yourself setting up as a student entrepreneur, the amount of financial support out there varies between different universities. Whether you’re based in the Midlands, London or the North, each university has its policy when it comes to student entrepreneurship.
You’ll find many who just simply don’t care about your business idea. They won’t have a person you can turn to for help and let you know that whatever you do outside of studies isn’t their concern. But you’ll also find universities that go above and beyond in supporting entrepreneurship. From close friends, I was made aware that the University of Manchester provides business bursaries to its students/ alumni.
Many other universities provide support in different forms. Whether that’s promoting what your business is doing, providing resources to help, or even getting a mentor, it’s worth reaching out to someone to see what’s available.
Speaking from my own experiences, I studied Aerospace Engineering at the University of Leicester. Now whilst there wasn’t any direct form of funding support from the university, they did sponsor the Leicester Innovation Hub, from which I was able to apply for grants, set up fresher’s stalls, and have access to a network of entrepreneurs all supporting each other.
Many Innovation Hubs exist up and down the country, and often, you’ll find that your university has direct links to one. We gained a massive amount of knowledge, networking, and support opportunities as part of the Leicester Innovation Hub which won’t stop as alumni. As a student, I definitely recommend that you find your closest Innovation Hub and start building relationships with them.
Having been a part of numerous accelerator programmes, we know they’re a great way to build up your knowledge and learn new ways of bringing in funding. Now whilst many won’t give you any physical cash, they do often get you in front of investors and allow you to pitch your idea to a panel of judges.
Accelerator programmes, often like grants, have a long application process and once begun, can be extremely intensive. This is due to the amount of material that gets covered in such a short time. However, when starting in the early stages you’ll find that investing in business knowledge can prove pivotal when it comes to raising funding. A recent study from Beauhurst found that "companies who attend accelerators raise 44% more money than those that don’t" (hint).
I and 3 of my companies have been part of numerous accelerator programmes, each targeting different types of knowledge and company stages. Last year I was part of the Global Young Innovators programme, run by Innovate UK and Newable. We aimed to pivot our company (Rounds Payment Gateway) so that it could solve the UN SDG’s whilst boosting partnerships between the UK and South Africa. As part of the accelerator, we were paired up with mentors, investors, and other entrepreneurs to boost our support. Then in the end were awarded a £10,000 grant to go away and build our ideas.
Many other programmes like this exist and they’re only just a google search away. But as is often said, time is the most precious commodity and accelerators are intense. You should make sure to apply for those who can provide you with benefits relevant to your business goals.
Angel Investors/ Venture Capitalists
Any entrepreneur would be lying if they said investors haven’t crossed their minds. With government schemes such as SEIS/EIS made as a tax relief method for investors, the funding available to start-ups (from private individuals) is increasing.
Angel investors typically tend to be individuals using their own capital and a much more hands-on approach to their investments (like Dragons Den). Whereas Venture Capitalists are normally associated with a fund and act on behalf of an organisation when making investments. Each come with their pros and cons, and it will be up to you to decide which ones are right for you.
An investment fund-raise is the process of receiving cash in exchange for equity in your business. However, this is much more simply said than done. Procuring an investment often involves pitching where you show financial projections, USP scrutinization, market opportunities, projected growth, exit strategy and whatever else is relevant to your investor. If you take anything away from this whole article, let it be “KNOW YOUR MARKET!” Without it, don’t expect any sort of credible investment.
One other important thing to remember is to “expect to be rejected”. Of the 10s or 100s of investors you speak to, 80% of them will likely reject you outright. However, there will be ones that believe in you/ your idea and are willing to give the cash to prove it. So don’t stop until you find them.
There are opportunities out there to support you. It ultimately comes down to the individual and what sort of direction your company is in. At Beta Booster, we really like grants, but someone who prefers to operate with more freedom would probably prefer bootstrapping.
Aside from the funding, we’d also recommend that you try to find some strategic advisors or mentors who can boost your chances of success. All successful founders have one thing in common, the help and support of others. They also help give you a bit more credibility, so if you do get to that Angel Investor stage, you’ll have the team that really gives investors confidence.
Now, whilst this blog hasn’t covered schemes like crowdfunding, that doesn’t mean there aren’t so many creative methods to bring some cash into your business. As an entrepreneur, you’ll soon discover that no journey is the same and Beta Booster is here to support you.