Finding the funds for your new start up - reviewing equity, public grants and crowdfunding

1. Finding the money

2. Todays objectives
• To learn how to calculate how much money you will need for your start-up or to
grow your company
• To learn how to create a growth plan for your business
• To understand the different ways of getting funding
• To understand the different types of equity funding
• Tips and tactics on how to look for and successfully apply for grant funds
• To gain an understanding of crowdfunding, the different types and different
platforms
• To learn how to create a more successful crowdfunding campaign for your business

3. Finding the money
Four ways of getting money:
− Equity – Dragons Den
− Debt – bank overdrafts / loans / credit cards
− Public sector grants
− Crowdfunding

4. Before we start
How much money do you need and for what?
• Don’t just think of the immediate future – think about growth.
Start-up costs
Business rent £
Business rates £
Water rates £
Light/heat/power £
New equipment £
Business insurance £
Travel and vehicle costs £
Telephone and postage £
Printing and stationery £
Advertising and promotions £
Accountancy and professional fees £
Development and training £
Stock £

5. Thinking about growth and the future first

6. Road mapping – where do you want to go?
EU
Launch
UK
Launch
Soft
Launch
TestingR&D
Month
1
Month
6
Month
12
Month
18
Month
36

7. YR3
£K
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Curren
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year
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3
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Gross Margin
Net Profit
Business
Value
Personal
Income
Turnover
Set 3 year targets for them.
Vision Orbit

8. Define the core drivers of success within your business.
Vision Orbit
• Turnover
• Income (in your pocket)
• Net profit
• Cost structure
• Investment
• Target markets / sectors
• Products / Services strategy
• Mix of customers (A/B/Cs)
• Gross margin & strategic aims to
develop it
• Number of customers
• Customer value (order size vs value)
• Customer growth strategy
• Lead generation
• Sales conversions
• Suppliers – Partners
• Service standards
• Organisational stuff (impact of growth
plans)

9. Can you create a road map or
vision orbit for the next 3 years?
• Pay specific attention on
what you think will be your
funding requirements to
get to each stage

10. What are your costs?
Page 10
Start-up costs
Business rent £
Business rates £
Water rates £
Light/heat/power £
New equipment £
Business insurance £
Travel and vehicle costs £
Telephone and postage £
Printing and stationery £
Advertising and promotions £
Accountancy and professional fees £
Development and training £
Stock £

11. Types of equity funding
Equity
Personal
equity
Venture
capital
Private
investors
Crowd
Funding
Personal funds from family or
friends.
No guarantee that they will
get the money back
Business Angels investment for
a share of the profits / company
May want day to day
involvement may not
Typically for more established
businesses
Larger levels of investment
A relatively new way of
equity funding your
business. Projects usually
in the region of £50,000 to
£1m

12. The art of raising business angel funding
• Don’t underestimate them – they may care less about financial returns than
professional investors but this doesn’t mean that aren’t switched on
• Understanding their motivation – Many angels want to pay back society and only
possibly make money. Angels see two ways of paying back society – helping
younger people to start and help a product or service that makes meaning get to
market
• Make your story understandable to a friend – Its vitally important to make your
business understandable in plain terms – avoid jargon
• Be a nice person – Angels typically invest in people not ideas. So be nice, be
approachable and most of all be passionate and enthusiastic about your business
• Sign up people they know or have heard of – Angel investing is often more
about networking as much as profiting therefore if you can attract one person in a
network you are more likely to attract another.

13. Funding
Be aware:
• Funding applications will usually not pay for internal costs
• E.g. staff salaries,
• A lot of funds require a degree of “match funding”
• Some will require the money to be spent and then reimbursed
• Some funds are sector specific so your business may not be eligible.
The majority of funding applications require a
good quality business plan and / or a Pitchdeck

14. Public sector grants

15. Grant applications

16. Common mistakes when applying for
funding
No wow factor
• The proposition must have an exceptional differentiating factor
• Why would I invest in your proposal and not another one?
• Why would I buy your product / service and not your rivals?
• What is your sustainable competitive advantage?
Expecting a 24 hour turnaround
• Plan for a longer than expected turnaround – it could take months
Touting an untested idea
For the best chance of success produce a working prototype or have
demonstrable market need data
Avoid assumptions
Continue the market research and ensure your financials, in particular, are as
accurate as they can be
Lack of a clear development path
• What is the end goal and what will you need to achieve it?

17. Crowdfunding

18. What’s your definition?

19. Definition
“The practice of funding a project or venture by raising many small amounts of money
from a large number of people, typically via the Internet.”

20. Crowdfunding: how does it work?
• Online platforms that allow people to invest from as little as £10
• Pitchers post a video, summary, business plan, financials and legal documents
• No success fees until the pitch is funded
• Pitches tend to be 30, 60 or 90 days
• Round can be closed through the platform and only takes typically 2 weeks to get
your money from the site.

21. Some early examples
Mozart 3 Lenten Concerts
In 1784, 174 subscribers from Austrian
aristocracy.
Statue of Liberty (1885)
Statue donated by France but cost $250,000
to erect on granite plinth
Fund raising fell short, State said “no”
The New York World launched campaign -
$102,000 from 160,000 US donors, 80% were
contributions of $1 or less!

22. Let’s name the platforms

23. A “crowded” market?

24. Can you identify the types?

25. Crowdfunding: models
Donations:
Contributions go towards a benevolent cause and the donor receives nothing in return
Rewards:
Investors receive a tangible item or service in return for their funds. (Invest in
film…and get tickets to the premier)
Debt:
Investors are repaid for their investment over a period of time at a specified rate of
interest
Equity:
Investors receive a stake/ shares in the firm.

26. Crowdfunding: donations
• Used for good causes – community projects, personal fund raising, “worthy causes”
• Funding not repaid
• Many of you will have used this type of crowdfunding

27. Crowdfunding: rewards
Funding not repaid but a “gift” is given as a reward
Kickstarter - Creatives focus: $2.8Bn of pledges, 12m funders in 120,000 projects!
Gambitious - Games focus: Reward & Equity
Peoplefundit & Bloom VC - arts focus: Rewards
Wefund - Creativity: Rewards

29. Bryt Socks results
768 backers
Range from £1 (gift) to £1,000 (50 pairs of socks plus 2 designs into production)
£27,060 of an £18,000 target in 33 days

30. Crowdfunding: debt
• “peer to peer” lending
• Lenders receive return on their investment
• Used to raise debt funding that “traditional” means would find hard to support
• Also micro-finance to support poor in developing economies (interest free)

31. • Typically 9-12% per annum
• Usually pre-screened through brokers,
introducers, agents
• Often targeted at existing businesses, with track
record, who can finance debt repayments
• Average funds £10-50k
• 60-70% success rate, 2 weeks
Crowdfunding: debt

32. Crowdfunding: equity

33. Case Study

34. Success
• Funding target of £110k in 2 days
• Stretch target of £150k in 2 weeks
• 119 investors
• Ranked #1 or #2 on Seedrs for whole pitch period
• Well planned campaign

35. What is Crowdfunding good for?
• Funding specific projects
• Raising start up funding
• Engaging your audience and growing it
• Reducing transaction costs
• Businesses with large “reach.”

36. What Is Crowdfunding not?
• A panacea
• The only answer
• Easy!

37. The process
Develop
Idea
Choose
Right
Platform
Pitch
Live
Donors
Pledge
Project
Funded

38. Develop project
• Define clearly what you want to fund
• Have a project plan – objectives, timescales, funding
• Funding Plan? What element is Crowdfunding?
Cost of completing the project
+ Cost of fulfilling rewards
+ Legal
+ PR & marketing
+ Platform & processing fees: ~10%
+ 30% cushion
= Minimum Funding Goal

39. Choose a platform
• Rewards or donations?
• Look and feel
• Ease of use
• Fees
• Timescales
• Audience and motivation

40. Pre-start New start Early growth High growth Maturity

41. Which platform would be best for you?

42. Pitch
• Create a compelling page – pictures and video
• Copy the best of others!
• Use your existing networks
• Publicise like mad!
• Use own social media networks – Facebook, Twitter etc.
• Timeframe

43. Project proceeds – the next steps
• Keep crowd informed
• Maintain regular dialogue
• Offer benefits (tangible or intangible)

44. Typical costs
• Pitch fee:
• cost of video/story?
• Marketing costs
• Success fee: 3% to 5% +
• Mostly all or nothing!

45. Top tips
Don’t rely solely on
Crowdfunding
Choose most
appropriate
platform
Have a clearly
defined project AND
plan
Set up core
team to run
campaign
Seed your campaign
with existing
supporters
Find third parties to
offer prizes/rewards
Offer donors
chance to engage
as well as donate

46. Top tips
Set a realistic minimum target, better to over achieve! “Stretch” at top
Good to have 30-40% lined up long before launch (pitches that reach 30% of their
target in a few weeks have 80% chance to get funded) Be clear on what you are trying
to achieve and what the money is for
Ideal to have own big crowd.

47. Key tips when applying for funding
1. Clarity and consistency.
2. Be concise.
3. Be realistic about what you will achieve.
4. Understand what the funders objectives are:
• Public sector often new jobs or business growth
• Private sector – assurance – ability to pay back the money or making money
from an equity investment
5. Follow the guidance notes, if supplied, and be aware of the rules specifically with
eligible spend

48. Summary
• When looking for funding for your business its important to start by identifying how much you
will need. Its more difficult to go back for more in some cases so try to get it right first time.
• The source you look for the money will depend on how much you require
• There are lots of grants available for pre start and early start businesses – routinely check the
relevant sites for new grants available
• Remember that funding can take longer than you think – specifically investment and
crowdfunding.
• With crowdfunding ensure that you pick the best platform for your idea, plan your campaign
well and most importantly do not launch too early.
• The most frequent reason for crowdfunding campaigns to fail is simply launching the
campaign too early without enough of a ground swell before launch

49. Sources of further Information
• Great Nesta white paper: “Working the Crowd”
• Great platform information source: www.crowdingin.com
• UK CF association: www.ukcfa.org.uk