Tag Archives: UK

The Expectation and the Reality of Funding a UK Start-up

In a recent study published by GEM lack of funding was cited as the major stumbling block by 50.6% of people who were thinking about starting their own business. The unwillingness of banks to lend to new and small businesses has been well documented in the media. The government and a whole host of entrepreneurs are currently engaged in trying to solve this issue. Alternative funding sources such as invoice factoring and peer to peer lending are being backed by the government while crowd funding is one of the hot topics of the day.

However the GEM report also indicated that borrowing money from banks or crowd funding start-up capital are not the only options available. It also shows that the expectations about where people think they will get funding do not always match the reality.

The Good, The Bad and The Ugly of UK Attitudes to Start-up Businesses

Start-up Business Attitudes UKGEM, the world’s largest study of entrepreneurship have released a new report focused on UK attitudes to, and experiences of, starting a new business. While the report is concentrated on Britain it also compares attitudes to start-up businesses with those in France, Germany and the USA. There is both some good news and some bad news from this report. Let’s start with the bad news

Bad News for UK Start-ups

  • 49.6% of British people do not believe that starting a business is a good career choice. Up from 47.4% in 2010
  • 9.8% of adults expect to start a business in the next 3 years, 4.2% of the adult population are actively trying to start a business but only 3.4% of adults are actually running a business.
  • There is a lack of positive stories about new businesses in the media. 55.8% of people said that the media did not often carry positive news stories about people starting new businesses, up from 48.5% in 2010.
  • People are increasingly scared of starting a business. People who reported a fear of failure stopping them starting a new business even where they saw good opportunities increased from 36% in 2010 to 41.4% in 2011.
  • Lack of funding is a major obstacle to people wanting to start a business. 50.6% of people who wanted to start a business, and 46% of people who actually have started a business, cited it as the main barrier.

Good News for UK Start-ups

  • 47% of people who wanted to start a new business believed that they could afford to fund it out of their own pocket.
  • People who had a new business, up to 4 months old, remained stable in 2011 at 3.4%. Meanwhile people who had established businesses older than 42 months went up from 6.2% to 6.5%.
  • The total number of people involved in planning or running early stage startups was 7.6% in 2011 where it had remained constant at around 6% between 2002 and 2010.
  • The number of people who had no intention to start a business and were not involved in starting a business dipped below 80%. The first time this has happened since the survey started in 2002.
  • 27.9% of people felt there were good opportunities to start businesses in their local area
  • 36.7% of people felt that they had the necessary skills and experience to start a business

The GEM report gives a very mixed picture of the UK start-up scene. Clearly a significant proportion of the population can see business opportunities and feel capable of starting a business. However a fear of failure, lack of funding and lack of positive news stories are discouraging them. Starting a business is a minority pursuit in the UK with only 7.6% of people actively involved in start-ups. By European standards this is not bad and places us a couple of percentage points ahead of both France and Germany. However we still have a long way to go to catch-up with the American’s where over 12% of the population are involved in start-up activity.

UK Government Expands Support for Start-ups

Start-ups are a very hot topic at the moment. The government, along with business and various campaigning groups are very keen on encouraging people to start new businesses. This is seen as a way to stimulate growth out of the current recession and create jobs. Lots of announcements have been made and schemes launched in the last 6 months. Some of these are now reaching the point where they are actually going live.

Government Startup SupportOne of the government’s more publicised initiatives is the small start-up loans available to 18 to 24 year olds announced back in May. Up until this week no-one was sure when these loans would actually be available, however reports from a marketing meeting held by Startup Britain on Monday suggest that the loans will be available at some point in September. There is no official confirmation of this as yet. You can register your interest in applying for a start-up loan on the government’s Business in You website.

One of the criticisms that has been levelled at the start-up loans initiative is that it only targets young people. There are already established schemes for young people run through The Princes Trust, Shell Livewire and VM Pioneers among others. However there are very few similar sources of funding or support available to people over the age of 30 who would like to start a business.

This week the government has announced a new scheme called Ready for Business which may address this issue. It is being funded through the government’s Regional Growth Funds with a contribution from Barclays Bank. The scheme will be run by the newly formed Cavendish Consortium which is made up of the National Enterprise Network, six regional ‘enterprise support organisations’ and Barclays. There are no age limits on this scheme and it is targeted at public sector workers who are undergoing a ‘transition from employment’. So the idea is that people who are being made redundant from the public sector should start a business instead of trying to find a new job. This funding is being targeted particularly at ‘areas disproportionally affected by the downturn in the economy’.

The Ready for Business scheme largely provides training and support to come up with a business plan and to learn how to run a business. There is no specific funding attached to it but the scheme promises support and guidance in applying for funding from other people. It is claimed that this scheme will create 6,000 new businesses and 10,000 new jobs.

Getting funding is the single biggest challenge for most start-ups at the moment, with the banks reluctant to lend. The government hopes to solve this with their new Funding for Lending scheme where they essentially give the banks money on the condition that the banks then lend it to small businesses and homeowners. Meanwhile the Seed Enterprise Investment Scheme came live in April this year. This scheme gives investors tax relief on investments in new start-up companies. The government has also pledged to give £100 million to alternative lending schemes such as invoice factoring and crowd funding to further bypass the banks.

It will take time to see what effects these schemes have on the number of start-ups that can get funding and the number of start-ups that survive. The real measure will be if they can, as the government hopes, get Britain out of the current recession and make a dint in the unemployment figures, especially for young people where the rate is currently over 20%.

UK Ecommerce Exports: How much are they really worth?

UK e-commerce exports I recently came across a report claiming that 30% of all cross border trade in the EU goes through UK ecommerce retailers.  Whilst I know that many UK retailers are doing very well with online export sales this figure sounded a bit high.

Although there have been dozens of articles written on UK ecommerce exports most of the figures quoted come back to 2 or 3 pieces of original research.

The first is a report by the Boston Consulting Group which was commissioned by Google in 2010. It reveals that :

  • In 2009 the UK internet economy was worth £100 billion, which is about 7.2% of GDP.
  • This revenue is not limited to online retailers. In 2008 Business to Business Ecommerce in the UK was worth £360 billion which was 23% of the total purchases by nonfinancial businesses.
  • The UK is a net exporter of ecommerce goods and services, exporting £2.80 for every £1 imported.

The second, less widely cited, report was produced in 2011 by internet payment gateway Worldpay. It reveals that:

  • More than 1 billion parcels are shipped by UK ecommerce retailers every year.
  • SMEs who offer international delivery of products and services through their website report it accounting for 30-40% of income.

The final source is a joint report from the courier company DHL and the British Chambers of Commerce. It is a bit light on facts and figures but does include a widely re-used quote from Phil Couchman, Ceo of DHL Express for the UK and Ireland. He says that

“There are plenty of success stories out there of fledgling companies beginning to

export into foreign markets. An increasing number of UK exporters are seeing

flourishing e-commerce sales to the continent and further afield, specifically

Australia – as disposable income and favourable exchange rates across the Pacific

create inroads for British goods”.

So what can we learn from all of this?

Well first of all, accurate figures for UK ecommerce exports are hard to come by partly because the government does not collect them. The official export statistics are focused on traditional manufacturing and services exports.

Secondly we can see that the UK ecommerce and internet sector are in a very healthy state despite the recent recession. We can also see that for small and medium size companies having the ability to accept international orders through your website can be a very valuable source of sales. As long as you have the infrastructure in place to support it entering the ecommerce export market can be an easy way to grow your revenue.

Majority of Customers Shop Online. Majority of Businesses Do Not Sell Online

Online Shopping in UK Continues to GrowNot only is the UK population spending more time online they are spending money there as well.

According to research from comScore there are 37.6 million internet users in the UK. These users average 35.1 hours per month online. This places the UK third behind Canada and the USA in terms of online usage. Internet traffic in general is growing year on year with almost all sectors of the internet showing growth.

The UK is one of the biggest ecommerce markets in the worls. 71% of the UK population has bought online, up 4% since 2010. Online shopping in the UK in 2011 totaled over £50 billion, which is 12% of all retail spending. This is predicted to grow to £77 billion in 2012.

However, only 14.9% of all UK businesses sell their goods or services online. With SMEs the figures are even lower with just 14.3% of businesses selling online. The numbers are increasing fast though, with 228,000 UK retailers now trading online, up 30% on last year.

Some businesses clearly won’t be suited to trading online due to the nature of the products or services that they sell. But retailers who can sell online and aren’t are clearly missing out on a large customer base. The barriers to selling online are becoming ever weaker. If your business is not ready to invest in an ecommerce solution then simple payment options such as PayPal can be easily added to your site. Alternatively you can sell through one of the many online marketplaces such as eBay, Etsy or Amazon.

If you want to discuss which option would be best for your business you can speak to one of our Business Consultants on 0800 0828 727.

Fund Your New Business without a Bank Loan: ask the crowd

Fund you new business without a bank loanLots of people have an idea for a new business but lack the funds to get it off the ground. One traditional way of raising new company start-up money is to raid your own savings or borrow money from friends or family. However many people are not willing or able to do this and without some basic capital of your own, or a house to act as security, it can be hard to get a bank loan.

In recent year a new option has begun to emerge through crowdfunding. Crowdfunding is like a Dragon’s Den pitch that is open to the public. People with a business idea can put a pitch up on a crowdfunding website describing what their new venture is, how much money they want and what the investors will get in return. Users of the website can then choose to give as much or as little money as they like. If target set by the new company is reached they get their funding. If the target is not reached then the investors get their money back. Unlike Dragon’s Den through, the investor does not normally get a share of the company. This is largely because of investment regulations which place limitations on how businesses can buy and sell their shares. Instead they might get priority access to the new company’s services or limited editions of their products.

Crowdfunding has proved to be popular with Kickstarter, who helped to pioneer the model, having raised $200 million since they launched in April 2009. This total was achieved through 1.8 million people funding 20,000 projects as diverse as an urban farm, an online magazine and numerous films and works of art. One of the most high profile success stories for Kickstarter has been a company called Pebble who went on Kickstarter looking for £100,000 to produce their new high tech watch. They hit their funding goal within 2 hours and ended up raising $7 million.

At the moment many of the crowdfunding platforms are American but Kickstarter and Indiegogo allow projects and investors from around the world to participate. Meanwhile there are a range of UK based crowdfunding platforms in the works with seedrs and crowdfunder being leading examples.

The potential of crowdfunding for business start-ups has been recognised by President Obama who recently signed the Jobs Act. This will allow American start-ups to sell up $1 million of shares through crowdfunding. Some people have raised concerns that this will leave business start-ups and investors open to fraud. As with any business or investment opportunity people will need to be aware of the risks and invest carefully. Crowdfunding may not yet be a mainstream way of raising money for new businesses but if you have an interesting or quirky product it can be an excellent way to get prototypes and other proofs of concept under way.