Starting up a start-up. A personal experience; finding funding (2/2)
In our last post we talked about financial planing when starting your own company. The big question still remained;
Where do you get funding?
At least in the UK there are plenty of options. As we explained in a previous post, there is no right or wrong way to start your company and this list is based on our beliefs, opinions and experience only. So what works for us does not necessarily mean that works for you as well. And certainly we have a “unique” way of how we see and do things. Probably not the typical company.
- Payday loans. Nope. Not a good idea; very high interest rates.
- Loans. In 2014 we talked to 2 financial advisors from a growth hub. We were told that a business loan can have an interest rate of up to 12-13% per annum. Immediately our answer was NO. Although Academous has great potential why to get a loan with such an interest rate when you are unsure if your idea is going to work or not? And anyway, you do not have the money now. What makes you think that you will have the money in one, two or three years? For us that would have been a ticking time bomb. If we would have got a bank loan, it would have been also the bank’s fault and the story of the global financial crisis we are still experiencing, would repeat its self. Like nothing has changed after 10 years and after so many people becoming poor, homeless and jobless due to poor decision making from both parties (banks and borrowers). Like the banks and the citizens have not learned nothing from this crisis.
- Angel investors. That idea was also on the table when we were discussing with the aforementioned financial advisors. We don’t like the idea of giving equity to someone who would get a big chunk of your company and your future profits for such a small amount. Also it seems that there is a growing concern that start ups burn money very fast and investors are not very happy about that. And also investors\venture capitalists\lenders are acknowledging the risk they take when investing\lending money to companies, but if the companies survive, they will ask their money back. So again you work for someone else instead of being your own boss. For these reasons we said No again.
- Peer to peer lending. We have read only very few things about it. The interests rate of a P2P loan can be lower compared to a bank loan. In the UK P2P lonas are not regulated by Financial Services Compensation Scheme (FSCS) with whatever that might mean for both parties; the lender and the borrower. It is usually a mixture of a loan and an investment. You ask for capital and in return you either give equity or you need to repay the money you borrowed with an interest rate. As you can understand we crossed that from our list for the aforementioned reasons.
- Borrowing from family and friends. We have never done that. Hopefully we will never do it.
- Government loans. In most of the cases you need to have assets in your name or your company needs to generate a certain turnover in order for it to be eligible for a government loan. Not applicable for a company in its early stage. Again if we fail, we need to pay the amount back. And remember, there is great uncertainty in business. Especially nowadays -just read the financial news and hopefully you will understand what we are talking about.
- Grants.Now that’s a capital idea! You get a small amount, you do not need to give any equity of your company to someone and you do not need to repay it even you fail. Unfortunately there is A LOT of competition. We applied twice and we failed. In fact we know other companies who applied for grants and failed as well. What can you do? Failure is part of life too. For every “success story” that you hear there are many more that failed. And that is fine.
- Crowdfunding. Now we are talking! You do not have to give any equity and a lot of people who find your idea interesting contribute an amount, small or big, and you have your 20K. It sounds easy? Yes? Here is a nice question.
How do you engage all these people within 1 month in order to contribute to your cause?
We have no personal experience with crowdfunding but we intend to find in a few months. This is our next goal.
- Regional Development Programmes. They are Programmes funded by the EU and their aim is to assist less developed regions across the EU. Academous is based in the Northwest of the UK and in 2014 there were Regional Development Programmes that were providing technical assistance to Small and Medium size Enterprises (SMEs). We applied, our application got accepted, and because of these programmes the front end of our MVP was born! We would like to thank everyone who was involved in that. Without them we would not have made it. And this is one more reason why we are against BREXIT. We believe that without these programmes a lot of SME’s will close and only the big companies will operate in the UK. But of course this is just our opinion.
Probably this list is not complete. Probably there are many more ways of funding an idea. We just don’t know them -yet.
Thank you very much for reading this! You ‘ve been fantastic and we hope you enjoyed it!
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Post copied from Academous blog.
Categories: Inspiration, Projects