The next level: How to get funding for your startup
You’ve got a great idea.
It's sprouted into a business.
But now how do you grow?
This is a tough question. If you’ve just started a business, you might find that your resources are relatively modest - but this is not necessarily an impediment to gaining more.
One way to grow is to build slowly, incrementally and within your means. Another way is to obtain funding. With increased resources comes increased potential for growth. And if you can increase funding substantially, your potential for growth increases substantially too.
But how do you actually get funding? Here we will discuss the practical steps that a business can take to get funding. We’re not talking about massive tech startups that blow up with $100 million support - this is about companies like your own startup.
So let’s explore how to get funding in a little more detail.
Funding For My Business; What Are The Options?
There are numerous options for businesses that you might not be aware of. Sometimes people feel like their idea is simply not eligible for funding, but you don’t have to be the next Google with a revolutionary idea. Any business can be eligible.
It’s common to read about the hot new startup getting all the attention (and money) from wealthy investors - but that doesn’t mean other businesses are excluded. Even the most humble hobby-come-business can be eligible, so it’s worth investigating.
So with that in mind, let’s look at some of the options for your business:
GOVERNMENT SCHEMES: The current UK government is investing heavily in businesses in an attempt to deliver on economic pledges. This means that schemes like the Seed Enterprise Investment Scheme (SEIS) are particularly good. You can join the site and be listed on the SEIS Directory to showcase your site to investors. Launched in 2012 it allows companies with less than 25 employees to raise up to £150,000. There are some rules that should be consulted, but most startup companies are eligible. There is more information on the SEIS website.
PRIVATE SCHEMES: Raising capital with government supported schemes is great, but there are plenty of privately run programmes to apply for too. They provide capital, mentorship and other help. Accelerator programs are everywhere these days waiting for entrepreneurs. A good one is Seedcamp, although technology companies are mainly accepted and it is London based. Another is Oxygen, which is based in Birmingham. Most private schemes focus on the more profitable and emerging sectors of tech, so if your business isn’t suited to this you may not be successful in securing private funding from these schemes.
- BANKS: Perhaps the most obvious lending source. You can apply for a business loan to get funding for your business. This will require something more than ‘a good idea’ in most cases and will require demonstrable business plan and predictions to show that you can pay the loan back. These are not new options, but viable nonetheless if you need funding for your business.
Taking into account the fact that government or private schemes can be applied to by any business, it’s worth investigating. You might have more of a challenge on your hands if you’re starting a small crocheting service than you would if you have already developed a killer app - but it really doesn’t hurt trying.
Raising Money From Individuals
There is a possibility that the traditional avenues for finding funding aren’t suitable for you. But a good alternative that many people don’t talk about is raising money from individuals. You can approach business associations in your area and get in touch with their members to see if there is anyone interested in investing.
You could approach former employers even, if they are a savvy business and know you personally, it is quite possible they might vouch for you and lend you some money - or give it to you in return for a share of equity.
You could also raise money from family or friends. Lots of people might be put off by this assumption, but the fact is that pitching to a close-friend or family member can be a lot easier than going into a bank. They are more likely to ‘believe’ in your idea and see past any obstacles that might put traditional lenders like banks off.
Crowdfunding & More Options
If you’re still struggling, you can take to that wonderful democratiser - the world wide web - and try to raise some capital. Looking at some of the crowdfunding options like Kickstarter is a good tip for small businesses - you never know, some people might love your idea and take it viral.
Crowdfunding is great because of the following reasons...
- CROWDS CAN GATHER: The idea of asking a single person or company for funding is daunting. With a crowd, even if 1,000 people offer £1 you still have raised a good amount, and people are much more likely to give smaller amounts in higher volume than they are to give higher amounts in a smaller volume.
- MICROTRANSACTIONS: Getting a lump sum from a lender is an arduous task, but getting microtransactions from many people online is much easier. A micro transaction could be 1p. It’s quite a small amount, but the real benefit is that you could potentially have millions of them.
- MARKETING: Getting your proposed business up and running via a crowdfunding campaign it relatively difficult, but raising even modest amounts successfully can show others that there are people interested in your idea. This is great marketing, and can potentially lead to more funding opportunities and give you a strong card to play in your next pitch meeting or when you next apply for funding.
If a bank or accelerator turns you down, but you raise money successfully the ‘new’ way, this shows a level of savviness that is appealing to investors further down the line. However, if there are to be any successes, you need to make the initial jump and take a chance with crowdfunding.
The Old Fashioned Way
Yes, sometimes you just have to start growing your business yourself until you catch the eye of investors. This means implementing your thoroughly vetted business plan and undertaking the process of raising money yourself.
It’s important to keep your business going, even if you can’t secure funding. If you can build incrementally and improve each day then you’re growing as a business - so do this and you’re much more likely to attract funding from other sources down the line.
Company Formation MadeSimple is an approved e-filing partner of Companies House. To date Company Formation MadeSimple have registered over 400,000 UK limited companies and offer a number of online formation services for first-time formers and serial entrepreneurs alike.
By Alex Novakovic at MadeSimple – Follow Alex on Google+