Monday 7 August 2017 02.00 EDTLast modified on Monday 7 August 2017 02.01 EDT
For all the support they promise startups, business accelerators are arguably not delivering. Too many startup founders are not getting to the finishing line of a big pay day on exit or stock market launch.
The UK is ranked third in the world by the Organisation for Economic Cooperation and Development (OECD) for the amount of startups created but only 13th for the number that go on to become established medium-sized companies. Lack of access to financing as a business matures is clearly an issue.
A government report has shown that fewer than one in 10 firms that obtain seed funding in the UK go on to receive later stage fourth round investment, compared with nearly a quarter in the US. Last week the Treasury announced it will set up a national investment fund to address an estimated £4bn funding gap between US and British firms.
But an often overlooked problem is that many startups take a disjointed short-term approach to growth whichis killing the golden goose before it gets to market.
Fledgling businesses rarely command seed or venture funding right out of the gate. But they still need cash to get started.
While entrepreneurs have more capital sources than ever before, they’re also faced with a ton of misinformation.
For example, a PwC report last month raved about crowdfunding and how it’s helping female founders get ahead in business. The report lumps Kickstarter-style campaigns together with peer-to-peer lending and equity fundraising online. It regards these as a single source of capital, which it calls crowdfunding.
In reality, there’s a big difference between securing a loan for your business and winning over backers on a site like Kickstarter. Meanwhile, equity crowdfunding, enabled by sites like AngelList,CircleUp and SeedInvest, is generally for businesses that are further along.
On the equity sites, founders provide a business plan, including information about early sales and user traction. Investors can browse and evaluate deals. After a mutual due diligence process, start-ups issue stock to investors.
Here are the real ways that most entrepreneurs get money at the very start.