Jane Imrie

Funding for scaleups: business leaders have their say

How exactly do fledgling enterprises take the next step and grow into scaling businesses? More often than not, a prominent catalyst for growth is a cash injection to propel firms into an upward trajectory.

But the practicalities of accessing funding are often not as simple as people think. Bdaily spoke with a number of business leaders about the realities of scaleup funding and the opportunities available.

Colin Bell, North East LEP

“We know that businesses can find the business support and access to finance landscape confusing and the North East Growth Hub aims to simplify that through its website and Connector service.

“Supporting businesses to grow is a critical part of our Strategic Economic Plan to create more and better jobs.

“To continue to do this effectively we are encouraging the government to develop longer term funding that is tailored around the business real growth journey.”

Tessa Clarke, co-founder of OLIO

“2019 has been a bumper year for investment in UK scaleups, which is great news for both entrepreneurs and the economy.

“This funding uptick creates a highly desirable ‘virtuous circle’ in terms of inspiring the next generation of entrepreneurs, attracting talent and enabling best practice to be shared between scaleups; which in turn drives more success and more funding.

“One black spot on this otherwise very rosy picture however is the fact that sadly these investment spoils have been far from evenly distributed – the British Business Bank, Diversity VC.

“The BVCA released a report earlier this year which revealed that for every £1 of venture capital investment in the UK, all-male founder teams get 89p, mixed-gender teams get 10p and female founded businesses receive a paltry 1p.

“There are similar challenges for founders from diverse ethnic and socio-economic backgrounds too.

“What this enormous funding bias means is that the extremely important societal problems that are all too often being solved by the more diverse founding teams (e.g. the climate crisis, poverty, inequality) are going under-funded, and ultimately, this negatively impacts us all.”

Lauren Couch, principal at BOOST&Co

“The UK boasts more than one-third of Europe’s fastest-growing tech companies, but this proportion could increase if access to funding was improved.

“Tech businesses face unique financial challenges because of high research and development costs. They need large initial investments and have limited funding options for scaling up.

“The UK’s digital sectors received £1.57bn in equity finance in 2015, but where can tech businesses turn if they’re ready to grow but don’t want to dilute equity any further?

“Traditional banks and many alternative lenders aren’t interested in loss-making companies. For BOOST&Co, the answer is venture debt, which can support firms that are pre-profit but have high potential for growth.

“The challenge for these businesses is to know who to approach. It’s our job to ensure they’re aware that there is another option, beyond delaying growth or sacrificing equity, and to support tech companies at every stage of their growth.”

Jonathan Oxley, managing partner at Lupton Fawcett

“There is plenty of early stage money out there through angel investors, EIS Funds and regional growth funds.

“More public money needs to be put into supporting the growth phase but there is too much red tape and turf war getting in the way of that happening.”

Dmytro Okunyev, founder of Chanty

“There are multiple sources of funding, such as business and personal loans, crowdfunding, taking money from venture capital funds and finally, going the bootstrapped way.

“This is the preferred way for me and my company because although being bootstrapped means more struggle in the beginning, it brings much more freedom later on.

“Being bootstrapped means having the freedom to make your own decisions about your startup, whom to hire and whom to let go, what kind of features to build, etc.”

Do you think funding for scaleups is where it should be? Join the conversation on Twitter with @Bdaily and #ScaleupFocusWeek.

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