Anx Patel, CEO and Founder, GoKart
The UK is globally renowned for its entrepreneurial ecosystem that encourages innovation, scale-up and growth.
Boasting some of the world’s leading disruptive companies, including digital bank Revolut and food delivery service Deliveroo, the country was recently ranked the fourth most promising market for disruption, technology and innovation by KPMG[i]. And the so-called ‘start-up revolution’ shows no signs of slowing down – between 2012 and 2017 there were 3.5 million start-ups launched across the country.
While there are many reasons why the UK has been able to nurture entrepreneurs and start-ups into becoming fully-fledged SMEs, one of the key factors has been access to finance. In particular, the exponential rise of the UK’s alternative finance sector has been vital;the alternative finance market grew by 43% in 2016 to an estimated value of £4.6 billion. Importantly, nearly three-quarters of this capital ended up being used to fund SMEs.
For newly-launched and scaling businesses, one of the first hurdles they face is securing investment to cover both their initial operational costs and long-term growth prospects. Stringent lending measures imposed by high street banks can often make traditional avenues of credit particularly difficult to access. However, for those with only a basic understanding of alternative finance, seeking funds from this sector can seem overwhelming.
So, what do start-ups need to be aware of when looking to alternative finance to help fund their business?
Equity or debt?
Today, there are a wide number of alternative finance options available to UK start-ups, but the difficulty often lies in choosing the right type of model most suited to the progression of the business. From the beginning, a distinction must be made between equity or debt finance – is the start-up prepared to offer a share of its ownership to investors for funding, or does it prefer to pay back the capital raised with added interest?
More often than not, start-ups will opt for equity finance due to the expertise and knowledge it can bring to the business during the formative stages. This was certainly the case with GoKart. As part of a successful equity raise, we were also able to receive successful backing from high-net-worth’s (HNWs), including a Lord from the House of Lords; chairs from Barclays, Credit Suisse and Morgan Stanley;the founder and CEO of London restaurant chain Tossed; and the founder and former CEO of the UK’s largest food procurement company PSL.
For a company seeking to disrupt the Fundtech industry, having these investors on-board has been invaluable to GoKart’s scale-up success. Not only have they offered vital support and mentorship, they have also opened up the business to new networking opportunities. Of course, when it comes to equity finance, a start-up must be disciplined in terms of the stake of the business it is willing to offer to investors. Failing this, the leadership team’s ownership could be significantly diluted, making it more difficult for issues to be quickly addressed and resolved – not to mention being of potential detriment to morale and motivation.
On other hand, debt finance can also be used for fast-growth innovative businesses. While traditionally more difficult to secure than equity finance, debt can be offered to those companies that demonstrate immense growth potential. In most cases, lenders will need to be confident that the company will be able to pay back the loan with interest through the revenue generated. Typically, debt finance is more suited to those companies in their Series B or later stage funding rounds – firms that have become larger and more established.
Be realistic with your funding goals
It seems not a day goes by without a UK business raising over a million pounds to support their expansion. While this is an impressive feat, and indeed testament to the UK’s thriving alternative finance industry, it is important for start-ups not to slip into the mentality of “the more funding, the better”.
Before a funding round begins, clear and attainable targets must be set. Raising the bar too high could not only damage the reputation of the brand should the target not be met; it could also force the business to inefficiently spend money in areas they weren’t initially planning to. The fundamental rule here is not to be carried away – a long-term funding strategy that clearly defines how and where the raised capital will be used is often the best option.
This measured approach to fundraising has been a key factor to GoKart’s funding success. Having raised over £525,000 to date, from multiple sources as mentioned, the company has put together an experienced board of investors who benefit from knowing how to run a successful funding round. This is already proving valuable as the business is in the midst of its next funding round.
Of course, the need for investment is not something unique among start-ups – established companies will also need to consider external finance models to consolidate and expand their share of the market. By taking note of the above advice, businesses of all sizes will be able to take advantage of the alternative finance opportunities currently available and find a model best-suited to their long-term growth plans.
About the author
Anx Patel is the CEO and founder of GoKart, an app that enables restaurants to order ingredients from high quality suppliers easily, quickly and for less money. GoKart offers restaurants savings of up to 20% when ordering supplies through its app, allowing independent restaurants and growing chains to enjoy the same discounts offered to larger chains.
German January exports to UK fell 30% year-on-year as Brexit hit – Stats Office
BERLIN (Reuters) – German exports to the United Kingdom fell by 30% year-on-year in January “due to Brexit effects”, preliminary trade figures released by the Federal Statistics Office on Tuesday showed.
In 2020, German exports to the UK fell by 15.5% compared to 2019, recording the biggest year-on-year decline since the financial and economic crisis in 2009, when they fell by 17.0%, the Office said.
“Since 2016 – the year of the Brexit referendum – German exports to the UK have steadily declined,” the Office said in a statement.
In 2015 German exports to the UK amounted to 89.0 billion euros. In 2020, German they totalled 66.9 billion euros.
Imports to Germany from the UK totalled 34.7 billion euros in 2020, down 9.6 % compared to 2019.
(Reporting by Paul Carrel; Editing by Madeline Chambers)
German unemployment unexpectedly rises in February
BERLIN (Reuters) – German unemployment rose in February for the first time since last June, data showed on Tuesday, dashing expectations for a fall as lockdown measures to suppress the coronavirus case load held back Europe’s largest economy.
The Labour Office said the number of people out of work rose by 9,000 in seasonally adjusted terms to 2.752 million. A Reuters poll had forecast a fall of 13,000.
“Kurzarbeit (shortened working hours) continues to secure employment on a large scale and prevent unemployment,” Labour Office chief Detlef Scheele said in a statement, adding: “Individual sectors are feeling the effects of the lockdown.”
Germany has been in lockdown since November, and measures were tightened in mid-December, as it battles a second wave of the virus. Chancellor Angela Merkel has said new variants of COVID-19 risk a third wave of infections.
The unemployment rate remained unchanged compared with the previous month at 6.0%.
The labour agency said some 2.39 million employees were on shortened working hours in December under the government’s Kurzarbeit scheme designed to avoid mass layoffs during downturns by offering companies subsidies to keep workers on the payroll.
After peaking at some 6 million last April, the number of people on Kurzarbeit fell before rising again in November as lockdown measures kicked in, the Office said.
(Writing by Paul Carrel; Editing by Madeline Chambers)
We cannot ‘lockdown’ to avoid the climate crisis
By Vaughan Lindsay, CEO, ClimateCare
The parallels between the Coronavirus response and how we could all collaboratively tackle the climate crisis should not be overlooked. Tackling either problem, for instance, has changed our lifestyle in so many ways. In short, we have all have to make adaptations for a much longer-term gain. I also believe that the pandemic has highlighted to us all that we can live differently; indeed, that we are all incredibly adaptable.
We cannot isolate from the climate crisis.
Nevertheless, there are also some very important differences too; namely the speed in which we witness effects and how long we will all live with the impact. Covid-19 is more immediate, it’s on everyone’s minds (no matter how fatigued we all are by the topic after a year of living with it). Climate change, on the other hand, feels like a much longer-term threat which doesn’t invoke the same kind of unease or fear – or at least not enough for people to take immediate action. Yet, as Mark Carney so eloquently summed up recently, the world is heading for mortality rates equivalent to the Covid crisis every year by mid-century unless action is taken right now. “One of the biggest issues is you cannot self-isolate from climate,” he said. “That is not an option. We cannot retreat in and wait out climate change, it will just get worse.” Bill Gates also further highlighted the severity of the situation too when he recently commented that solving climate change would be “the most amazing thing humanity has ever done” and by comparison, ending the pandemic is “very, very easy”, the billionaire founder of Microsoft claimed.
Ultimately, the short-term imperative of dealing with the Covid-19 pandemic doesn’t alter the urgency of dealing with the climate crisis. And certainly, there is currently no ‘silver bullet’ for solving either the pandemic or climate change. However, there are a set of agreed actions that every business and individual can (and should) take to help tackle these issues. To tackle Covid-19 we lockdown, we work from home, we continue social distancing, washing our hands and wearing masks to protect one another and the NHS. And of course, we continue to roll out the vaccines and treatments for longer term protection.
On the other hand, we cannot lockdown to tackle the climate crisis. Rather for climate change, it’s about understanding and taking responsibility for our climate impact, both by changing our behaviour to reduce our carbon footprint and by decarbonising many of our business models and lifestyles. .
Now is the time to build back better.
To ‘build back better’ then we need to work towards a sustainable low or zero carbon recovery, and this needs to be done with realism and integrity. Not only does this mean that we need to work together to create integrated and robust climate strategies, but we also need to take action to decarbonise sooner rather than later and while we make these structural changes, we need to ensure that we are compensating for all residual emissions as part of everyday business too.
Taking action (over pledges).
Despite the pandemic, it was encouraging last year to see the ever-increasing number of corporates committing to achieve Net Zero status. However, whilst it is great to see firms working hard to measure their footprint and set reduction targets, many firms still admitted to us that they are waiting to get this right before they take action to reduce and compensate for their emissions. This remains a concern. Because, whilst these plans and long-term targets are commendable, they do little for the environmental damage that is being done right now. There is a risk of action hiding behind plans.
Ultimately, we need to more than halve emissions by 2030; this is equivalent to reducing the current emissions of China, India, the EU and the US combined. It’s a mammoth task. To tackle it we need to drive actions simultaneously and at pace, and then modify and adjusting moving forward. In simple terms, there really isn’t time to take things one step at a time anymore. We need to take action right away. As such – and as we continue through this coming year – we need to see more of these ambitious plans and statements put into practice, as companies continue to turn their plans (and pledges) into action.
Time to raise the bar.
The issue of climate change is now central to nearly all forward-thinking corporates and we are now witnessing one of most encouraging environments for them to act on this. It’s vital to ensure that the role of the voluntary carbon market delivers real additional emission reductions on the ground and at scale.
Never before has there been a better time to raise the bar and our own ambitions about what positive corporate action looks like. Because the climate will not respond to targets and pledges. Only action counts.
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