Having a brilliant idea for a new business is awesome, but making that idea happen? Convincing investors your startup is worth their cash is super hard, especially when you're just starting.
There are lots of ways to get funded in the UK. Whether it's grants from the government, taking out small loans, joining an accelerator program, or pitching to angel investors - this guide has you covered. We'll walk through each funding option step-by-step. For every type of financing, you'll learn the good points and bad points.
How to Get Funds for Your Startup?
1. Bootstrapping
Bootstrapping is when entrepreneurs start a business using their own money. This allows them to maintain full control and ownership early on. No investors mean you call all the shots yourself initially. Keeping control is a major perk of bootstrapping for startups.
Self-funding lets you build at your own desired pace, too. There's no investor pressure rushing growth before you're ready. You can test ideas and make adjustments, all on your timeline. Bootstrapping provides flexibility that raising investor funds just cannot match.
Try to get guaranteed startup business loans for bad credit in the UK. These enable bootstrapping without wiping out personal savings completely. Explore alternative lenders providing fair loan terms despite credit challenges. Responsible bootstrapping via these loans maintains your freedom while funding growth.
Finding affordable ways to bootstrap is crucial in the early stages. Minimise costs by working remotely, using free software tools, etc. Get scrappy about spending to stretch self-funding further. But don't underinvest and sacrifice quality - strike that balance carefully.
2. Angel Investors
Angel investors are wealthy individuals who invest their own money in startups. They look to fund businesses they believe can become successful. Angels are different from venture capitalists who invest a firm's money.
When pitching to angels, you'll need to show traction first. This could be several customers, sales numbers, or other key goals met. Proof you are making progress matters. Angels need confidence that your startup can achieve big growth goals.
Angels invest just as much in the founder(s) as the idea itself. Communicating your vision is super important too. Angels prioritise entrepreneurs they have faith in to make it happen.
There are active angel investor groups all over the UK:
- UK Business Angels Association connects angels nationwide
- Regional groups like Minerva (London), Entrepreneurial Spark (Scotland)
- Universities often have alumni angel investor networks, too
When pitching angels, customise the presentation to their industry experience. Highlight relevant backgrounds, past work, and successes connected to your startup.
3. Government Grants and Loans
Grants come from different government organisations and funds. Some are for specific business types like tech companies or green startups. Others support entrepreneurs from certain backgrounds, like women, minorities, or disabled founders. Grant amounts typically range from £5,000 to £500,000.
Applying for a grant takes work but is worth it. You need to submit a detailed business plan and financial projections. Having a prototype and evidence of early traction boosts your chances. The application process is very competitive.
If you don't qualify for a grant, startup loans are another option. These loans come with generous repayment terms and low-interest rates of around 6%. The great thing is you can get approved even for loans for bad credit and no guarantor. Loan amounts are up to £25,000.
To apply for a startup loan, you'll need:
- A written business plan describing your idea
- Cash flow projections for the first 2-3 years
- Details on your target market and marketing strategy
- Information about you and your team's experience
The government also has other funding programs to be aware of:
- Innovate UK - Grants for pioneering R&D projects across all sectors
- Advanced Propulsion Centre - Funding for new low-emission vehicle technologies
- Aerospace R&D Tax Credits - Claim back up to 33% on R&D costs
No matter which option you pursue, government funding is a great way for cash-strapped startups to access financing with minimal equity dilution. Just be sure to have a strong, well-researched plan ready.
4. Venture Capital
Venture capital is a major way for startups to get big money to grow quickly. VC firms invest millions from funds they manage. They take an equity stake and a hands-on role. VC is common for startups looking to scale fast.
To attract a VC's interest, you must have an impressive traction record. They want metrics proving your product is a must-have for a huge market. You'll need to show strong revenue growth already happening. VCs invest in potential unicorn companies, dwarfing the competition.
The VC evaluation process is intense, spanning months of scrutiny:
- Meetings to drill down on every aspect of the business
- Reference checks on the founders' backgrounds and abilities
- Careful assessment of the market size opportunity
Getting funded by a VC means giving up a large equity portion. It also means accepting heavy involvement in major decisions going forward. VCs want board seats and strategic control as lead investors. Be ready for their very hands-on approach.
If you do land a VC investment, expect a gruelling sales cycle afterwards. The firm will want updates weekly, even daily sometimes. They'll pressure rapidly hitting new milestones.
5. Accelerators and Incubators
There are special programs to help called accelerators and incubators. These give startups like yours training, advice, and sometimes money too.
An accelerator program lasts a few months. You get coaching from experts who have started companies before. They teach you important skills like making a business plan and pitching to investors. At the end, you usually present your startup to potential funders.
Incubators are longer, often a year or more. You get office space and access to resources. Mentors guide you every step of the way. Some incubators invest cash right away.
Joining one of these programs is super helpful for many reasons:
- You get training on all aspects of starting a business
- Experienced entrepreneurs mentor and advise you directly
- You meet other founders to learn and network with
- There are opportunities to get investor funding
- You get affordable office space and resources
There are lots of great accelerator and incubator options in the UK:
- Entrepreneur First (London) - Provides pre-seed funding and helps match co-founders
- Bethnal Green Ventures (London) - Focuses on startups using tech for good
- CyberASAP (London) - Cybersecurity accelerator with funding and corporate partnerships
- Ignite (Newcastle) - Offers founder training, prototyping grants, and angel investment
On the incubator side, some top UK programs include:
- SETsquared Partnership (Multiple locations) - World's #1 university business incubator
- Barclays Eagle Labs (Nationwide) - 25+ maker spaces with 3D printers, latest software
- Wilton Centre (London) - Science incubator providing specialist labs and equipment
The best program for you depends on your startup's needs. But joining one can hugely increase your odds of getting funded and growing a successful business.
Conclusion
From government grants and loans to angel investors, crowdfunding, accelerators, incubators, and venture capital - there are plenty of options out there to fund your startup.
The path that's best for your startup depends on various factors. Some are like your business model, growth stage, and funding needs. Some entrepreneurs will find success with non-dilutive grant funding first. Others may benefit more from an accelerator program's mentorship and investor connections.
Don't limit yourself to just one funding route. Explore multiple possibilities to find the right fit and resources to scale your startup.
