Startup funding in the UK

When you’re just getting started, the UK startup funding
world seems very complex. Here’s some information to
help you make sense of the chaos and give you some
starting points.

 

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There are a lot of options to get a startup funded in the UK, and the numbers are constantly growing. From investors to crowd-funding, tax breaks to grants, the landscape of startup funding in the UK can be somewhat bewildering even to those, like us, who are deep within it. It’s not surprising that everyone else is even more confused.

This page is an attempt to build a centralised resource of key pointers to further information. I hope it proves useful to you.

If you have some feedback (positive or negative) about some of the companies linked to below, please do let me know, so I can keep updating this.

Finally, one of the best people to speak to about funding on the London startup scene is John Spindler. Get in touch if you’d like an intro.

– Daniel Tenner (aka swombat)

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.

Crowdfunding

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.

Debt funding

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.
  • Advance Funding
    And of course, let’s not forget GrantTree’s very own Advance Funding: help for your cash flow when you need it most by getting your R&D Tax Credits filed and paid in one week.

Incubators

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.

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.

Government Funding

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.
  • Innovation Grants
    Check out the grants offered for ground-breaking innovation under the Innovate UK and H2020 schemes.
  • 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.

UK Government Funding Faqs

Want to know more about UK Government funding? We have written and compiled this list of practical, useful articles, covering the key topics that we are experts in: R&D Tax Credits, Innovate UK Grants and EU Grants.