Business
New Research for 2020: UK start-ups secure funding with ease but struggle with spending.
Here at Soldo, we work with many start-ups, and we know that securing funding and spending it on growth is a key part of their journey. We recently conducted a survey of decision-makers at 250 start-ups across the UK and Republic of Ireland to dig deeper into the challenges they face in this area. The survey revealed that while seven in 10 found it easy to raise funds, many struggle when deciding how best to use the money to grow the company.
Nearly all (95 percent) of the start-ups we surveyed reported facing difficulties in deciding where to spend the funds to grow the company. For a quarter of start-ups, this was due to political and economic uncertainty. A fifth said they lacked the financial insight to make smart decisions. Decision paralysis was also a problem – a quarter of respondents said that they were held back by personal fears about spending the money incorrectly.
The research also found that start-ups are prevented from achieving growth by restrictive spending policies. Lengthy financial sign-off processes dampen spending for 20 percent of start-ups, and nearly one in five (18 percent) said that their teams and employees don’t have the necessary freedom to spend for company growth.
For those start-ups that did face difficulties when securing investment, one of the most significant challenges was providing investors with a financial forecast – an issue for over a third (35 percent) – while a further 30 percent struggled to secure a meeting with investors or to come to an equitable deal once they did.
In terms of the type of funding raised, 24 percent secured VC investment, and a further 21 percent received angel investment. Crowdfunding was also popular, with a fifth going down this route. Nearly half (44 percent) used a bank loan to fund or partially-fund their business, while a quarter used an alternative loan provider. Bootstrapping is also still hugely popular, with 40 percent using personal savings to fund the company.
Our survey also asked what each start-up would do with a miraculous, no-questions-asked cash infusion of £1 million. Almost half of respondents (46 percent) said they would develop new products and services with the money, while 43 percent said they would use it to optimise operations. A further 41 percent said that they would invest in new equipment or software, and nearly one third (30 percent) said they would pay off debts.
If you need help with raising and spending funding, do not fear – Soldo is coming to a destination near you. We’re excited to be working alongside the Startup Van and a team of brilliant start-ups to tour the UK and Ireland throughout the month of January, starting in London on Clifton Street, Shoreditch on the 24th. We’ll be in Digbeth, Birmingham on the 27th and Ancoats Square, Manchester on the 29th, before our finale in Dame Lane, Dame Court, Dublin, on the 31st.
We look forward to meeting many of you in person while we’re on the road. Until then, you can grab a slice of insightful conversation by heading over to Dough Stories, where founders have met to enjoy some pizza and discuss their start-up journeys.
