Capital.

An essential ingredient for building your company. Without it, you can't operate and grow. It's as simple as that.

Right now, this is a concerning reality for unprofitable startups and scale-ups. Why? Today many companies find themselves in a difficult position amid a challenging VC fundraising climate.

Due to the economic downturn, VCs are tightening their approach to new investment opportunities. Much more attention is going into keeping existing portfolio companies alive than it was this time last year. And, many of those will ultimately be left to fend for themselves.

In 2020-21 if your company was performing reasonably well or if you had a *half-decent* fundraising narrative, it felt like attracting VC investment was completely doable.

Now, the fundraising experience is much more challenging. VC expectations are growing while their investment rate is slowing down. The bar is high. Really high. For those that don't reach it, term sheets are effectively off the table. For now, at least.

This cohort of 'unfunded' companies are, and will be, forced to go into a survival mode. Which, ultimately means being creative and looking for financing opportunities outside the standard VC pathway.

The fight for survival has begun!

Fortunately, VCs are not the only option. There are multiple ways to fund your company. Which, we have detailed below in an easy-to-digest list.

Each of these options on their own may not be a survival 'silver bullet', but, depending upon the nature and circumstances of your company, utilising two or more could help get your company through the VC drought.

So, let's have a look. 👇

#1 Innovate UK Smart Grant

What is it?

Innovate UK is a UK government agency that provides capital and support to organisations to encourage the development of cutting-edge ideas. Innovate UK offers several schemes to fund innovation. Smart Grant is a flagship initiative that finances projects with the potential to disrupt the market and strengthen the UK economy. 

Am I able to get it? 

Smart Grant is an industry-agnostic program. To be eligible to apply, you must be a UK-registered business working on an innovative idea that can bring a quick economic return to the country. They accept applications from any area of technology.

Their website says "your proposal must be business focused, with deliverable, realistic, adequately resourced plans to achieve return on investment, growth and market share following project completion."

Here are more details on the eligibility criteria. 

How much can I get?

If you're seeking financing for a 6 - 18 months runway, £100,000 - £500,000. For 19 - 36 months, £100,000 to £2 million.

Is it dilutive? 

This is a non-dilutive type of funding. The main advantage of this financing method is that you don’t have to pay it back.

How long will it take?

The currently opened competition closes on July 27th, 2022, at 11:00 am. Applicants will be notified on September 30th, 2022.

How do I do it?

To participate in this funding competition, you have to provide project details, answer application questions, and estimate your project costs. You can find more information and start your application here.

#2 Innovate UK Fast Start Funding

What is it?

Fast Start is a new series of grants from Innovate UK. The goal of this program is to give small businesses the opportunity to grow, support their innovative ideas, and boost the UK economy.

Am I able to get it? 

This program supports businesses that aim to solve big challenges. The grants are available for innovations in the following areas of technology:

  • Advanced materials and manufacturing
  • Artificial intelligence, digital and advanced computing
  • Bioinformatics and genomics
  • Engineering biology
  • Electronics, photonics, and quantum
  • Energy and environment technologies
  • Robotics and smart machines

These grants will only be accessible to companies that haven’t received Innovate UK funding before.

How much can I get?

Up to £50,000 for each grant.

Is it dilutive? 

This financing option is a grant, so it’s non-dilutive, and you don’t have to pay it back.

How long will it take?

The competition will be open between July 11th and 27th, 2022.

How do I do it?

To get this funding, you must demonstrate that you have an innovative idea, have the capacity to deliver this project, and require public funding. The application consists of 3 sections: project details, application questions, and finances. Here’s how you can apply. 

#3 Horizon Europe Funding

What is it?

Horizon Europe is an EU program that aims to support ground-breaking research and innovation.

Am I able to get it? 

This grant-based funding is available for UK-based businesses that demonstrate excellent research and respond to challenges like food security, climate change, or healthcare. Your project has the potential to boost growth in sectors like manufacturing, biotechnology, materials, nanotechnology, space, information, and communication.

How much can I get?

The program has a budget of €95.5 billion. According to Crunchbase, companies typically receive a five- to seven-figure sum.

Is it dilutive? 

This is non-dilutive funding.

How long will it take?

The process may take up to 8 months from application closing to the signing of the grant.

How do I do it?

If you’re planning to apply for this funding, you can get guidance and help from the UK government to get the most out of Horizon Europe. Here you can find your National Contact Point (NCP) - a team appointed by the UK government to give you advice and support you throughout the process, including proposal preparation and application stages. Their service is free to use.

#4 Revenue-Based Financing

What is it?

Revenue-based financing (RBF) is an alternative funding option that offers fast cash and doesn't require giving up ownership. It allows founders to get capital in return for a certain percentage of future sales.

Am I able to get it? 

Revenue-based financing works best for subscription-based business models, e-commerce, or software-as-a-service (SaaS) businesses. Your company needs to have recurring revenue (6+ months of revenue history) to turn it into capital for further growth. Some providers also require you to have 3 months of runway and ARR between $250k - $100M+.

How much can I get?

The amount can go up to $20M. Most RBF services charge a 5-20% fee on the amount you borrowed.

Is it dilutive? 

This approach helps founders retain control over their business without diluting the equity.

How long will it take?

For different platforms, the process takes between 24 and 72 hours.

How do I do it?

You can instantly get cash through Pipe - a platform that provides quick access to on-demand capital. Pipe’s platform offers capital to any businesses (not only SaaS companies) with predictable revenue streams. There are also other platforms like Capchase and Clearco.

Here's even more, courtesy of Trends.vc:

#5 Credit Line

What is it?

Some startups can advance their digital store revenues or video games tax relief (VGTR) refund and get on-demand capital. Funding platforms such as Sugar, Braavo, and Pollen VC provide you with a credit line based on your monthly revenues.

Am I able to get it? 

If your company plays in the gaming or mobile app fields, you can consider getting capital through a credit line. You’re eligible if you’re in business for 6+ months with monthly revenue of over $10k (over $25k for Pollen VC) and have live apps on the App Store or other digital stores.

How much can I get?

Loans amounts vary and can go up to $10 million. The service fee ranges between 1% and 10% depending on the platform and the amount you borrow.

Is it dilutive? 

A credit line is a non-dilutive source of capital that allows you to retain full control. It needs to be paid back within a certain time frame.

How long will it take?

As fast as 24 hours. 

How do I do it?

All you need to do is create an account on the platform of your choice, fill out an application form, and provide the details about your business - no personal guarantees are required. If you’re eligible, you’ll receive an offer shortly. Here you can start your application with Sugar, Braavo, or Pollen VC.

#6 Bank Loans

What is it?

Companies can get a business loan from mainstream lenders such as banks. They are more willing to give you money if you present your assets as collateral - e.g., machinery, equipment, or real estate. In case you are physical asset-light (which is likely for software startups!), you may get capital with an unsecured loan, which is typically more expensive.

Am I able to get it? 

Bank loans are mostly suited for companies with a consistent cash flow and a good credit rating.

How much can I get?

Typically between £1,000 and £500,000 with a bank loan. But, the sky is the limit depending on your cash flow and other factors.

Is it dilutive? 

A bank loan is a non-dilutive financing alternative. But, if you default on your payments, there may be clauses in the loan agreement that convert the outstanding balance into equity.

How long will it take?

The application and approval process might take weeks or months until you've received the money.

How do I do it?

Check out available business loan options from bank lenders and choose the one with the most favourable terms and conditions for you. Consider any fees, penalties, and charges before making a decision.

#7 Peer-to-Peer Lending

What is it?

If banks are not an option, peer-to-peer lending, or debt crowdfunding, can be your workaround. It is an emerging way of financing where individual lenders provide cash to startups. Companies can raise money through platforms like Funding Circle, Zopa, Crowdstacker, FOLK 2 FOLK, or Lending Works.

Am I able to get it? 

Companies whose credit rating or cash flow is not sufficient for banks. Also, it’s a great option for startups looking for quick access to cash.

How much can I get?

Through P2P lending, companies can generally get between £1,000 and £500,000.

Is it dilutive? 

P2P lending is a non-dilutive financing alternative.

How long will it take?

Peer-to-peer lending platforms are quicker to consider your requests than traditional lenders. However, the process might still take several days to a few weeks.

How do I do it?

Select the platform of your choice and register there. You will be required to submit financial records along with the details of any existing debt before you've got a loan.

#8 Venture Lending

What is it?

Venture lending is a type of debt financing provided to companies by banks and non-bank lenders. Venture debt can be an alternative to venture capital that prevents further dilution of equity. 

Am I able to get it? 

This way of financing is typically available to venture-backed startups that have completed one or two rounds of VC fundraising. It is mostly suitable for businesses with no positive cash flow or significant assets. 

How much can I get?

Loan sizes and types can vary depending on the scale of your business and the equity raised to date. Typically startups can get 30% of the total amount raised in the last round.

Is it dilutive? 

As a rule, a venture loan is a non-dilutive type of capital. However, lenders receive warrants that allow them to buy equity to compensate for the high risk.

How long will it take?

The process usually takes up to 6 weeks.

How do I do it?

Approach venture debt providers to enquire about the possibility of financing (here's a list). You'll need to prepare a bunch of documents to demonstrate your startup’s financial health to the lenders. Silicon Valley Bank has a great article on how it all works.

#9 Crowdfunding

What is it?

Crowdfunding is a way to finance your business through a large group of individuals investing capital in exchange for certain rewards. These rewards can include shares of your company (equity crowdfunding) or your products or services (reward-based crowdfunding).

Equity crowdfunding is an opportunity to find investors who will offer more money than a typical customer and share their knowledge and expertise to help you grow. 

Reward-based crowdfunding is not only an opportunity to finance your business but also a marketing tool that raises awareness, attracts publicity, and helps you reach many people. If you are in the prototype stage, crowdfunding is also a practical way to validate your idea with the audience. 

Am I able to get it? 

This financing method is suitable for B2C companies looking for Seed to Series A funding. Equity crowdfunding is relevant for companies willing to give up equity and have no product to give away as a reward. Reward-based crowdfunding is accessible to companies willing to offer their products or services in return. 

How much can I get?

Depending on your reach, you can raise from five to seven figures with one campaign. One of the most well-known success stories is BrewDog, who have raised £73 million over six campaign rounds. Unfortunately, not every project is bound to succeed. Your chances to get funded are higher if you have a large and engaged group of (potential or existing) customers who share your vision. 

Is it dilutive? 

Equity crowdfunding implies sharing equity, while reward-based crowdfunding is a non-dilutive alternative.

How long will it take?

The length of the campaign is up to you. Typically, crowdfunding campaigns last for a few months. The longer you do it, the more money you can collect

How do I do it?

If you want to crowdfund equity, you can do it through platforms like Crowdcube and Seedrs. If you’re interested in reward-based crowdfunding, you can raise money on Kickstarter, Indiegogo, Patreon, or Crowdfunder.

Crowdfunding is a highly competitive space, so you make sure you stand out by preparing an energetic and bulletproof pitch. To generate ubiquitous support, you need a strong marketing strategy with a well-thought message, a product or service people believe in, and an attractive rewards scheme that encourages people to back you.

#10 Angels

What is it?

Whilst angels are well known for funding the entirety of Pre-Seed and Seed rounds, they are less well known for doing this for Series A and beyond. Hence, their inclusion here.

But, that looks like it could be changing! In our recent VC bear market article, we talked to a startup that raised a £4m Series A entirely from angels (because VCs were not interested).

Am I able to get it? 

Any startup willing to fundraise and give up equity can get funding from business angels.

How much can I get?

The amounts from each individual are typically lower than you would get from a venture capital fund. They vary significantly and typically range between £1,000 and £500,000. The total amount can be anywhere from £50,000 to millions. If you're raising a Series A round entirely from angels, you're likely going to need a 'whale' or two in your round. That's an angel who can fund £500k+ and has a big recognisable name, to attract more.

Is it dilutive? 

Yes.

How long will it take?

Although the process might be faster and more efficient than with VCs, it still takes time for a potential investor to examine your company’s background. Thus, it can last a few weeks to several months until you've got funds from business angels.

How do I do it?

You can find financial investors through a personal network, at startup events and conferences, or in places like AngelList or UK Business Angels Association (UKBAA).

#11 Family Offices

What is it?

Family offices are private wealth management firms that ‘manage’ the wealth of one or several families. They are also kind of 'the underdogs' of the startup funding ecosystem. Why? They are typically not a founder's first choice for capital, but in the current climate, they could be a lifeline.

Am I able to get it? 

There is no industry or stage restriction when it comes to raising capital from family offices. Overall, they invest in virtually any company situation. But, each individual office has their own unique approach in terms of market and risk appetite. And, not all *actually invest* directly in small private companies. So, you'll have to do your research to find those that are the best fit.

How much can I get?

Family offices can cover any round from Seed to Series B. The amount highly depends on the size of the family office and can range from a hundred thousand to millions. 

But, they rarely lead a round. So, if you are sticking clear of VCs altogether, you'll need to find a super angel to lead your round and set the terms.

Is it dilutive? 

This is a dilutive type of financing.

How long will it take?

Family offices can move fast. They do not have outside investors to answer to, so they can act on less information. This can significantly accelerate decision-making and help avoid lengthy due diligence processes (but this is not the norm). The process typically takes from a few weeks to a few months.

How do I do it?

Family offices come in all shapes and sizes. Try approaching those setups by extremely successful entrepreneurs first (e.g. Mark Cuban Companies). They are likely to be the most approachable and understanding of your situation. Plus, great entrepreneurs usually see opportunity in downturns, so they're not afraid to take a punt.

#12 Strategic Partnership

What is it?

Through Corporate Venture Capital (CVC), corporations can help you expand your reach, provide you with necessary resources, and shorten your time to market. They have the money, but they lack the know-how. And what is a better way to foster innovation than to cooperate with a startup?

Big corporations are willing to invest in startups for multiple reasons. For one, they need innovation to stay competitive, push new products to the market, and improve their services. Developing it in-house would be costly and inefficient. Moreover, they are not as laser-focused on their investment return as VCs often are. This makes them a great source of capital when VCs are out of the game.

Am I able to get it? 

Similar to business angels and venture capital funds, corporations invest in startups in all stages. And, they can provide you with a testing platform for your products.

Keep in mind that their terms can be restrictive. They might try to request exclusivity and prevent you from working with competitors. They know you’re under pressure to extend your cash runway, and if you’re knocking at their door, they have the upper hand at the negotiation table.

How much can I get?

CVC investments are likely to match or outbid the amount of capital you would get from VC. Depending on the arrangement with the corporation, the amount can vary from thousands to millions.

Is it dilutive? 

This is dilutive funding as you sell a part of your company to a corporation. 

How long will it take?

The process might take from a few months to a year.

How do I do it?

Consider which corporations would yield the most synergies with your startup before you outreach. You can meet potential investors at conferences and events. Or, ask your professional network for relevant connections.

#13  Customer Capital

What is it?

This may sound a bit radical for venture-backed companies, but, bare with me here. Another way to finance your business is to leverage revenues from your existing customers! After all, it’s the most self-reliant way to get cash without the need to apply for grants or involve third-party investors.

Am I able to get it? 

Any company with paying customers, regardless of the business model, can boost its revenues. All you need is to be willing to adapt and open up new avenues for money inflow. Sometimes, this means pursuing short-term opportunities that may otherwise be lower down the priority list or undesirable. Examples of this are discounts, offers, over-delivering on service, competitions, partnerships, creative promotions, etc. If doing this means staying alive it's worth it.

How much can I get?

The amount you get depends on the initiatives you implement and your timeline. Realistically, this could range between 5% and 30% of your existing revenue base.

Is it dilutive? 

No!

How long will it take?

Depending upon the implementation, you can see results within weeks.

How do I do it?

There are several ways to generate short-term revenue.

Reconsider your pricing strategy. Is there a way to incentivise your customers to pay upfront? It can be a discount or a prolonged service period in exchange for their money today. Also, repackaging your products or services and launching one-off or bulk offers can drive your sales up.

Implement juicy customer referral schemes. Incentivising client referrals instead of acquiring new customers yourself can help you reach new crowds more efficiently and cost-effectively. You can also try creating brand advocates to help you attract new audiences and strengthen your brand. Arm them with highly attractive icentives.

Adjust your business model. You can approach your (potential) clients with new offers, such as sharing your expertise through workshops or providing consulting services. This can lead to direct revenue in itself, or leads.

Ultimately, how to implement this well really depends on the circumstances of your business. It's all about creativity. Embrace Airbnb's Obama O's' cereal hustle mindset.

#14 R&D Tax Relief

What is it?

Research and development (R&D) tax relief is a government incentive that rewards companies for investing in innovation. Often, this results in a payable credit to an eligible company's bank account.

Specifically, I'm referring to the UK scheme of course. In all likelihood, you are pretty familiar with it!

But, did you know many companies do not claim their R&D relief as soon as they can? If you fall into this category and are entitled to a payable credit, this capital is essentially 'sat' with HMRC waiting to be claimed - instead of being put to good use to grow your business!

To avoid this aim to file your annual accounts with HMRC as soon as you are able to, instead of waiting. As soon as your accounts are filed, you can submit your R&D claim.

What am I talking about?

On Companies House, you'll notice there are two significant dates with regard to the accounts of your company. The 'made up to' date and the 'due by' date. 👇

In the above example, this company's accounts for the year ending 31st January 2022 must be submitted by 31st October 2022. But, they *can* be submitted anytime after 31st January 2022. February 2022, for instance.

This means the company in the above example could theoretically submit their R&D claim in February 2022 as opposed to November 2022 or later (i.e. if the accounts were filed in February and not at the last minute on Halloween!).

Am I able to get it? 

Yes, assuming your company has qualifying R&D expenditure under HMRC's scheme.

So long as your company is based in the UK and is attempting to solve technical or scientific uncertainties for new concepts and ideas, you should qualify. If you are unsure, please feel free to contact us by using the chat box in the bottom right of this screen. Or, by scheduling a call here.

How much can I get?

The amount of the R&D tax credit is calculated based on your R&D expenditure. Startups can claim up to 33% of the amounts they spend. For SMEs, an average claim is around £55,000. For Seed to Series B companies we work with, it's often six figures (£100,000 to £600,000).

Is it dilutive? 

No!

How long will it take?

At Claimer, we can turnaround your R&D claim and submit it to HMRC in as little as 72 hours. After that, you can expect to receive your R&D relief (often a cash credit into your company bank account) in a matter of weeks. Historically, this has averaged around 5 weeks.

How do I do it?

You can get started here.

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