{"id":34038,"date":"2018-03-23T10:35:12","date_gmt":"2018-03-23T10:35:12","guid":{"rendered":"http:\/\/icloud.pe\/blog\/?guid=d7f077bdb7a06c220c537401127241d4"},"modified":"2018-03-23T10:35:12","modified_gmt":"2018-03-23T10:35:12","slug":"the-cashflow-secrets-and-non-traditional-routes-to-try-when-financing-your-startup","status":"publish","type":"post","link":"https:\/\/icloud.pe\/blog\/the-cashflow-secrets-and-non-traditional-routes-to-try-when-financing-your-startup\/","title":{"rendered":"The cashflow secrets and non-traditional routes to try when financing your startup"},"content":{"rendered":"<p><span class=\"field field-name-field-author field-type-node-reference field-label-hidden\"><br \/>\n      <span class=\"field-item even\"><a href=\"http:\/\/www.cloudpro.co.uk\/authors\/alphr-staff\">Alphr Staff<\/a><\/span><br \/>\n  <\/span><\/p>\n<div class=\"field field-name-field-published-date field-type-datetime field-label-hidden\">\n<div class=\"field-items\">\n<div class=\"field-item even\"><span class=\"date-display-single\">23 Mar, 2018<\/span><\/div>\n<\/p><\/div>\n<\/div>\n<p class=\"short-teaser\">\n<a href=\"http:\/\/www.cloudpro.co.uk\/\" title=\"\" class=\"combined-link\"><\/a><\/p>\n<div class=\"field field-name-body\">\n<p dir=\"ltr\">It\u2019s never been easier to fund a good idea, but choosing the best route for your business can be a minefield.<\/p>\n<p dir=\"ltr\">Two decades ago, the choices were simple but limited: you\u2019d need a bank, benefactor or redundancy cheque. These routes are still possible, of course, but they\u2019re poorly suited to unconventional startups. Bold ideas from ambitious entrepreneurs need agile funding to match.<\/p>\n<p dir=\"ltr\">Modern, non-traditional sources of finance let today\u2019s founders think big from day one, building the kind of cashflow that businesses of yore had to build over a period of many years.<\/p>\n<p dir=\"ltr\">Less interested in past performance, the investors that today\u2019s startups attract buy into the stories behind them, many of which promise to build a happier, healthier, better-connected world.<\/p>\n<hr style=\"color: #2ba9db; background-color: #87cefa; height: 2px; border-width: 0px; margin: 1em 0;\" \/>\n<p style=\"text-align: left;\"><em><strong>Sage Live is a perfect fit for growing businesses. Learn about how this cloud accounting solution works with Salesforce to transform it into a complete business management and accounting solution.<\/strong><\/em><\/p>\n<p style=\"background-color: #0278c1; padding: 5px; margin-bottom: 10px; display: inline; text-align: center;\"><a style=\"color: #ffffff;\" href=\"https:\/\/dennistrk.cvtr.io\/click?pid=47&amp;lid=4787&amp;sid=&amp;utm_medium=referral&amp;utm_source=cloudpro.co.uk&amp;utm_campaign=Other%20content&amp;utm_content=7400-top\">Download now<\/a><\/p>\n<hr style=\"color: #0278c1; background-color: #87cefa; height: 2px; border-width: 0px; margin: 1em 0;\" \/>\n<h3 dir=\"ltr\">Traditional, non-traditional and personal funding explained<\/h3>\n<p dir=\"ltr\">Traditional, non-traditional and personal funding have fundamental differences, many of which relate to the level of risk to the startup, as much as they do to the source of the finance itself.<\/p>\n<ul>\n<li dir=\"ltr\">\n<p dir=\"ltr\">Traditional funding, like a bank loan, often requires that businesses have a proven track record, which is rarely an option for a startup. Alternatively, the founders may be asked to use their home as collateral. This makes truly revolutionary ideas or anything facing established competition, such as\u00a0<a href=\"http:\/\/www.alphr.com\/speakers\/1008420\/mycroft-kickstarter-open-source-smart-speaker\">Mycroft\u2019s Alexa rival<\/a>, too risky to get off the ground.<\/p>\n<\/li>\n<li dir=\"ltr\">\n<p dir=\"ltr\">Personal funding, like cashing in a pension or spending your life savings, may be too great a sacrifice for the first-time entrepreneur. Family and friends will often pressure them not to gamble their life\u2019s achievement against an uncertain reward.<\/p>\n<\/li>\n<li dir=\"ltr\">\n<p dir=\"ltr\">Non-traditional funding, like peer-to-peer lending, accelerators and business competitions, spread the risk across multiple micro-investors, or call on venture capitalists that can easily sustain a loss. They free the entrepreneur to focus on developing their idea, rather than chasing further funding or worrying that they\u2019re about to be out on the street.<\/p>\n<\/li>\n<\/ul>\n<p dir=\"ltr\">It\u2019s this latter category we\u2019ll be looking at here, with five non-traditional sources of funding all flexible startups must consider.<\/p>\n<h3 dir=\"ltr\">The different types of crowdfunding<\/h3>\n<p dir=\"ltr\"><a href=\"http:\/\/www.kickstarter.com\/\">Kickstarter<\/a>\u00a0is often credited with inventing the concept of crowdfunding, but that particular accolade goes to Marillion, after the band raised \u00a343,000 through donations in 1997 to fund its US tour.<\/p>\n<p>Since then, we\u2019ve seen the rise of\u00a0<a href=\"https:\/\/www.indiegogo.com\/\">Indiegogo<\/a>,\u00a0<a href=\"http:\/\/www.unbound.com\/\">Unbound<\/a>\u00a0and\u00a0<a href=\"http:\/\/www.patreon.com\/\">Patreon<\/a>, which have developed a framework for entrepreneurs, authors and ambitious online creators.<\/p>\n<p dir=\"ltr\">Oculus Rift and the Pebble watch were both crowdfunding successes.\u00a0<a href=\"http:\/\/positive.news\/\">Positive News<\/a>, a magazine that majors on constructive journalism,\u00a0<a href=\"http:\/\/www.ownthemedia.org\/\">crowdfunded its transition from a newspaper to a magazine in 2015<\/a>. It\u2019s now a co-op, owned by 1,500 micro-investors in 33 countries, each of whom can influence its direction.<\/p>\n<p dir=\"ltr\">But crowdfunding isn\u2019t for everyone. Marillion and\u00a0Positive News\u00a0each had a following; you\u2019ll be starting from scratch. Oculus Rift and Pebble were standout products. Is yours?<\/p>\n<p dir=\"ltr\">Successful campaigns need thought-through ideas, achievable milestones and \u2013 crucially \u2013 a plan for delivering tangible products or services. Your investors are your first customers, after all.<\/p>\n<p dir=\"ltr\">If your idea is conceptual, a slow burner, or promises to grow your supporters\u2019 investment rather than send them hardware, books or music, you\u2019ll have more luck with a dedicated business-funding platform.\u00a0<a href=\"https:\/\/www.crowdcube.com\/\">Crowdcube<\/a>\u00a0(which financed the\u00a0<a href=\"https:\/\/sugru.com\/\">Sugru<\/a>\u00a0mouldable glue) and\u00a0<a href=\"https:\/\/www.seedrs.com\/\">Seedrs<\/a>\u00a0(which helped\u00a0<a href=\"http:\/\/tosseduk.com\/\">Tossed<\/a>\u00a0expand) let you pitch to a different kind of investor \u2013 one who is less interested in your product than your business fundamentals.<\/p>\n<h3 dir=\"ltr\">Accelerators vs incubators<\/h3>\n<p dir=\"ltr\">If you crowdfund your venture, you\u2019re largely on your own. You\u2019ll be free to run things however you choose, but might end up spending capital on support. Consider an accelerator instead \u2013 or even an incubator \u2013 and that support will be built in.<\/p>\n<p dir=\"ltr\">\u201cAn incubator is more about the physical space,\u201d says\u00a0<a href=\"https:\/\/www.nesta.org.uk\/\">Nesta<\/a>\u2019s head of new technology and startup research, Chris Haley. \u201cAccelerators major on advice and support, with a cohort of ten or 20 companies coming together for a fixed period \u2013 typically six months \u2013 to benefit from peer learning.\u201d<\/p>\n<p dir=\"ltr\">Accelerators are often funded by businesses who want to get in on the ground floor by investing in ventures that will later deliver a profit.<\/p>\n<p dir=\"ltr\">Nesta has identified\u00a0<a href=\"https:\/\/www.gov.uk\/government\/publications\/business-incubators-and-accelerators-the-national-picture\">more than 200 incubators and 160 accelerators<\/a>, which support around 7,000 UK businesses with \u00a333 million of annual investment.<\/p>\n<p dir=\"ltr\"><a href=\"http:\/\/www.seedcamp.com\/\">Seedcamp<\/a>, the UK\u2019s longest-established accelerator, appears in the Nesta list and has invested in 250 ventures. It typically exchanges \u00a3100,000 \u2013 plus the time it spends advising the founders and introducing them to its network of advisors \u2013 for 7.5% of the startup\u2019s equity. Sia Houchangnia, a Seedcamp investment partner, describes the figures as \u201cpretty standard in the industry\u2026 there\u2019s not much of a question of modelling to understand if it\u2019s the right price\u201d.<\/p>\n<p dir=\"ltr\">It\u2019s this equity swap that distinguishes accelerators from incubators, the latter of which offer advice and support in exchange for rent and fees. By necessity, incubators invest close to home, while more than half of the UK\u2019s accelerators are in London.<\/p>\n<p dir=\"ltr\">Pitching to an accelerator isn\u2019t easy, but there are ways to increase your appeal. \u201cHaving a strong team in place, with an edge and an ability to address the problems you\u2019re going after, is crucial,\u201d Houchangnia says. \u201cYou might not have all the resources you need, but if you understand your market and have executed on similar products, that\u2019s important. We\u2019re looking for companies with global ambition.\u201d<\/p>\n<p dir=\"ltr\">\u201cAccelerators and incubators typically take on companies at about the same stage,\u201d says Haley. \u201cIt\u2019s wrong to think that accelerators are always super-early-stage investors and incubators later ones. Some will be, but some accelerators do want you to have proved yourself.\u201d<\/p>\n<p dir=\"ltr\">Accelerators and incubators typically take on companies at about the same stage. It\u2019s wrong to think accelerators are always super-early-stage investors and incubators later ones<\/p>\n<p dir=\"ltr\">Houchangnia agrees. For Seedcamp, the right time to invest is determined by several factors \u2013 and it\u2019s not always day one.<\/p>\n<p dir=\"ltr\">\u201cIf you\u2019re technical, going after a well-defined problem like early stroke diagnosis, we\u2019d be comfortable investing years before your first commercial contract. If the technology has less of an edge but the team has operational expertise, we might want to see proof of demand for the product. In some other cases, we might be looking at companies that already have early revenue.\u201d<\/p>\n<p dir=\"ltr\">Accelerators won\u2019t usually sign non-disclosure agreements (NDAs) as they need to discuss your idea with their partners but, says Haley, it\u2019s rare to come across a rogue operator.<\/p>\n<p dir=\"ltr\">Haley advises talking to potential cohorts and previous applicants, as well as the accelerator\u2019s own team. Most accelerators trumpet their successes on their websites \u2013\u00a0which in Seedcamp\u2019s case includes 161 operational companies, of which two are now valued in excess of \u00a31 billion.<\/p>\n<h3 dir=\"ltr\">Business competitions<\/h3>\n<p dir=\"ltr\">Failure to engage an accelerator may suggest you need to rethink your idea \u2013 or that you need a more specialist route of finance.<\/p>\n<p dir=\"ltr\">Funding competitions, sponsored by big business, accept applications from startups in the same or a complementary field.<\/p>\n<p dir=\"ltr\"><a href=\"http:\/\/www.shellspringboard.org\/\">Shell Springboard<\/a>\u00a0is open to applications from low-carbon businesses, and awards a single \u00a3150,000 grant per year, plus five additional grants of \u00a340,000. When we say grant, that\u2019s exactly what we mean: Shell doesn\u2019t take equity in the winning businesses. The money is backed by business-development feedback from low-carbon advocates.<\/p>\n<p dir=\"ltr\">It\u2019s just one of dozens that open for limited periods every year. Innovate UK \u2013 which itself offers between \u00a325,000 and \u00a310 million for innovative products, processes and services \u2013 maintains a\u00a0<a href=\"https:\/\/apply-for-innovation-funding.service.gov.uk\/competition\/search\">list of available funding opportunities<\/a>\u00a0and advice on applying for both\u00a0<a href=\"https:\/\/www.gov.uk\/guidance\/innovation-apply-for-a-funding-award\">funding<\/a>\u00a0and\u00a0<a href=\"https:\/\/www.gov.uk\/guidance\/innovation-loans-what-they-are-and-how-to-apply\">loans<\/a>\u00a0online.<\/p>\n<h3 dir=\"ltr\">Peer-to-peer lending<\/h3>\n<p dir=\"ltr\">If your venture doesn\u2019t align with an existing competition, your product isn\u2019t suited to crowdfunding and you can\u2019t attract an accelerator, is the bank your only option?<\/p>\n<p dir=\"ltr\">Not necessarily. Peer-to-peer lending could be the answer.<\/p>\n<p dir=\"ltr\">You may find peer loan providers, like\u00a0<a href=\"https:\/\/www.fundingcircle.com\/uk\/\">Funding Circle<\/a>, to be more flexible than your local bank. They\u2019ll still need to see a viable business plan and proof you can repay the loan, but by spreading the risk among hundreds or even thousands of individual investors, they\u2019re often willing to take a punt where a single financial institution may not.<\/p>\n<p dir=\"ltr\">Your level of risk is naturally reflected in their rates, but for a good prospect with viable plans to repay the investment, they start at less than 3%. This is broadly the same as a high-street bank.<\/p>\n<h3 dir=\"ltr\">Beyond banking as usual<\/h3>\n<p dir=\"ltr\">However you choose to finance your venture, the initial cash injection will likely mark the point where your idea becomes a viable startup. Where you go from here is up to you and your investors.<\/p>\n<p dir=\"ltr\">You may well discover that sourcing your capital was actually the easy bit. Check out how fintech can help you grow your business, and the one money mistake that all bad businesses make \u2013 and how you can make sure you don\u2019t fall victim<span>.<\/span><\/p>\n<p dir=\"ltr\"><a href=\"https:\/\/www.demographix.com\/surveys\/TWHI-SO67\/CVFQLWGN\/?source=2\"><strong><em>Take our survey for your chance to win \u00a3100 Amazon vouchers<\/em><\/strong><\/a><\/p>\n<\/p><\/div>\n","protected":false},"excerpt":{"rendered":"<p>      Alphr Staff<\/p>\n<p>        23 Mar, 2018    <\/p>\n<p>      It\u2019s never been easier to fund a good idea, but choosing the best route for your business can be a minefield.<br \/>\nTwo decades ago, the choices were simple but limited: you\u2019d need a bank, benefactor o&#8230;<\/p>\n","protected":false},"author":421,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-34038","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/icloud.pe\/blog\/wp-json\/wp\/v2\/posts\/34038","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/icloud.pe\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/icloud.pe\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/icloud.pe\/blog\/wp-json\/wp\/v2\/users\/421"}],"replies":[{"embeddable":true,"href":"https:\/\/icloud.pe\/blog\/wp-json\/wp\/v2\/comments?post=34038"}],"version-history":[{"count":1,"href":"https:\/\/icloud.pe\/blog\/wp-json\/wp\/v2\/posts\/34038\/revisions"}],"predecessor-version":[{"id":34039,"href":"https:\/\/icloud.pe\/blog\/wp-json\/wp\/v2\/posts\/34038\/revisions\/34039"}],"wp:attachment":[{"href":"https:\/\/icloud.pe\/blog\/wp-json\/wp\/v2\/media?parent=34038"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/icloud.pe\/blog\/wp-json\/wp\/v2\/categories?post=34038"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/icloud.pe\/blog\/wp-json\/wp\/v2\/tags?post=34038"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}