Should you get funding at all?
The first question worth addressing is whether you should get funding at all. Most funding guides just assume that funding is appropriate for your situation, without even asking the question. GrantTree never took funding, and it's doing great - which proves that not all startups need funding. Another common example is 37 Signals, which only took some funding from Jeff Bezos recently (for mysterious reasons) after staying out of the funding game for a decade.
The articles below explore the topic of whether and when you should get funding.
> Are you taking investment as a cushion or springboard? Too many new entrepreneurs go the funding route without considering other options. Are you getting funding for the right reasons?
> Idea reach and the cofounder myth If you need more funding than you have to build your idea, perhaps the idea is out of your reach?
> To raise or not to raise? Criteria for raising funds, or not doing so. My comments on this are here.
> What are the right investors for your business? My comments on the topic are here.
> The cost of funding may be your freedom A worthwhile counterpoint to the funding cheerleaders.
Crowdfunding is rapidly growing in popularity. I'm not convinced yet whether this model will work well in the long-term, but in the short term it is certainly producing results (i.e. money) for founders. The key options available in the UK are listed below.
> Crowdcube Crowdcube is a popular crowdfunding platform which has funded companies like EscapeTheCity.
> Seedrs Seedrs is another popular option for crowdfunding in the UK.
> Kickstarter Of course, Kickstarter has been available in the UK since October 2012 and should not be forgotten. More of a pre-sale platform than a funding platform, but then getting funding from your customers is always better than getting it from investors.
Not all funding has to be equity-based! However, let's face it, no bank is ever going to loan any money to any startup - at least not when they need it (except for one of them, see below). The businesses below all provide some for of debt financing to startups. Your mileage may vary, but it is likely that at least one of them will consider loaning you money when a bank would not even give you the time of day.
> Silicon Valley Bank SVB has been in the UK for some time already. One of the reasons why startups bank with SVB (apart from the service) is that SVB gets tech startups, so if you're a VC-funded tech startup, they're likely to be willing to extend you a loan to help leverage your funding better. It's almost a no-brainer to apply to SVB if you're the right kind of startup.
> MarketInvoice MarketInvoice provide invoice financing, which enables you to auction off your invoices sent to large companies, so you get the cash now and not in 90 days.
> ThinCats ThinCats are basically like bank lenders - i.e. risk-averse, and will only loan money to established, profitable businesses. But unlike regular banks they actually do loan money.
> Platform Black Another invoice financing platform.
> Funding Circle Funding Circle offer peer-to-peer loaning.
Unfortunately, none of these options will work for a cash-strapped, unprofitable startup. However, we (GrantTree) do offer a loan product as well. Get in touch and ask us about it.
Incubators are not for everybody, and one should be careful not to go to an incubator as the "easy option". There can be a large hidden cost to going through an incubator with the wrong kind of business (or a business that's too early to be worth that level of commitment). Make sure you think carefully about the pros and the cons.
A solid list of incubators can be found at f6s, but here are some of the more reputable ones we've encountered.
> Seedcamp The first incubator in the UK, now operating europe-wide.
> Springboard Now part of TechStars.
> Wayra Supported by Telefonica, Wayra is one of the better corporate-sponsored incubators out there.
Raising an angel round
One of the first stopping points for founders new to the UK funding scene is one of the numerous "angel networks" out there. Unfortunately, many of those charge (a lot) to pitch. I strongly disagree with that philosophy - as do many other startup figures in the UK and abroad. Instead, if you're looking for angel funding, try the following sites to get you started.
> Principles of pitching Learning how to pitch is obviously an essential first step.
> How to approach angels
> A cold email to an angel In general, warm intros are best, but sometimes you have to make do with a cold email.
> How to reply to an angel intro
> Friends, Family and Fools When all else fails, people often fall back on raising funding from friends, family and fools. I advise strongly against it.
> AngelLab A cooperative of reputable London investors.
> Find Invest Grow A service that helps prepare you for raising investment - and only charges on success.
> The Ideas Factory The Ideas Factory helps companies get their first round of seed/angel funding, using SEIS and other means, and charges a small setup fee and a success fee.
> Seed EIS Platform Similar to the Ideas Factory, Seed EIS Platform has helped a number of our clients raise their initial seed funds via SEIS.
> White Bear Yard / Passion Capital Passion Capital, founded by Stefan Glaenzer and Eileen Burbidge, has funded and hosted many top startups at White Bear Yard, including Flattr, Duedil, GoCardless, GoSquared, and Mendeley.
Raising a VC round
If you are raising a VC round, you should probably already have a network of contacts in place, including mentors who can help you through the process. If you don't have any such network, I'd strongly advise you to make backup plans and assume you won't get the VC funding. In either case, the articles below may be useful.
> How to raise a Series A round
> Venture Capital basics
Of course, I'd be doing GrantTree and you a disservice not to mention government funding options available!
> SEIS SEIS is a tax break for investors that can greatly reduce the risk of investment. As a UK startup founder, you should know about it.
> R&D Tax Credits R&D Tax Credits are a very reliable scheme that enables HMRC to pay cash to companies that are doing innovative R&D. If you're a "tech startup", you probably (though not always) qualify. You can get up to 25% of your R&D spend refunded each year after you file your accounts.
> Smart Grants TSB's Smart Grants scheme recurs every 2 months. It is highly competitive, but the right project (with lots of technical innovation, not just commercial innovation) can earn up to £250k of match funding.
> Patent Box The Patent Box is a new piece of legislation which can get solid tax breaks to profitable UK companies that own an EU patent covering some aspect of their product.
> SBRIs Another TSB Grant Scheme, SBRIs are basically government contracts, 100%-funded. However, the theme is often very narrow, so if you're lucky enough to find an SBRI in your area, this may be useful. Otherwise, not so much.
> Innovation Vouchers TSB's Innovation Vouchers can help fund some of your subcontracted cost in qualifying projets.
> Other TSB Schemes Finally, TSB run a number of ad-hoc competitions. You can find a list of those here.
> Startup Loans Currently only available for entrepreneurs under 30 years old, these are actual loans at a 6% rate of interest. May be of interest to some founders.
> Regional Growth Funds With £3.2b allocated for the 2011-2020 period, Regional Growth Funds can also help fund a business.