Raising funds for your startup is one of the top hurdles that any entrepreneur would face. Since the 2008 credit crunch, lending to small and medium businesses has dropped remarkably. However, there are more sources of startup capital than big banks. Here are some of the best sources of finance for startups in the UK?
1. Government grants
The UK government provides special Start-Up loans between £500 and £25,000 to start or expand a business. As you would expect, it is an unsecured loan categorized as a personal loan. The best part is that the government will give you free guidance and support in writing the business plan and, if successful, you will get 12 months of free mentoring assistance.
You need to be a UK citizen, aged 18 years or over, and already trading. A fixed-rate of 6 per cent per year is charged. You have up to 5 years to repay the loan. There is no early repayment fee or application fee.
Another way of funding your startup is sourcing small quantities of capital from many individuals, often referred to as crowdfunding. The UK has one of the largest concentrations of crowdfunding platforms in the developed world. Here is a list of some of the prominent options:
1. Crowdcube: They offer two types of investments: mini-bonds (lending funds) and equity (stake in your startup).
2. Seedrs: First-ever crowdfunding platform in the UK to get FCA approval
3. Indiegogo: Over 800,000 campaigns in 255 nations have been launched through Indiegogo since 2008. It is the biggest crowdfunding platform in the world as of 2020.
4. Trillion Fund: The best crowdfunding platform for social and environment projects
5. RateSetter: This peer-to-peer crowdfunding platform has lent out over £2.5 billion since 2010
Startup accelerators come handy when your startup needs low-cost space, talented employees, business services, and contacts that can help your clients in exchange for a small stake. In 2020, there are more than 160 accelerators in the UK supporting over 3500 new businesses annually. Here are the top accelerators in Britain:
Seedcamp: This accelerator has operations in over 30 cities in Europe. Applications are open four times every year
Founders Factory: They are the best choice if your startup requires reliable market insights, capital, product validation, and distribution
Tech Stars: With over 100 investors in their stable, they are one of the frequently sought after accelerators in the UK
4. Pitch competitions
In pitch competitions, you pitch your business in front of investors to raise capital. Even if you fail to win a prize during the competition, you stand to reap a lot of perks and benefits. The Pitch is one of the top pitch competitions in the UK. The pitch winner walks away with a mentoring package with industry’s leading PR and entrepreneurs while the finalists compete among themselves to win the best startup in the UK prize.
Tech Nation lets you showcase your startup to a pool of over 200 accelerators, corporate leaders, entrepreneurs, and investors.
Universities across Britain have increased their participation in commercialization of academic studies and research, helping over 13,0000 startups spread their wings between 2014 and 2018 of which 6,180 have grown to be successful businesses. In the 2014/15 academic year alone, 11,000 launches were made, of which 4,473 survived.
At the end of 2018 close to £1.4 billion had been raised in over 352 universities across the UK to support startups. That was £1.1 billion increase from 2017.
The leader of the pack is the University of Cambridge, followed by (in no particular order) the University of Bath, Imperial College London, University College London, and King’s College London.
A startup founder in the UK looking for a source of funding has more than enough options. Government grants are the best option if your startup’s funding needs are within the £500 and £25,000 bracket. Accelerators will give space and expertise you need to get your startup from the ground.
Crowdfunding platforms such as Crowdcube are excellent if you want several people to share your funding burden. If you are alumni of a university that supports startups, you can ask for assistance from them. The University of Cambridge is the leading institute of higher education in providing capital for startups.