Where to find some money to get going? But the right money for the right price.
So it’s all very well suggesting you should get advice and build a team, and that you should talk to the market (but doing so with the right IP protection). But the reality is that sooner or later advice, or people’s time and effort is going to cost money – good will, the promise of a reward at some point in the future can only get you so far.
Finding money isn’t easy or quick – it doesn’t grow on trees, and even if it did you have to plant the tree and wait years for it to grow before you harvest the cash. So it is wise to think early and cleverly about what you need and where you might find it.
The usual suspects
- Banks- with a well-established or low-risk idea the obvious place to look for money would be a bank and a loan. However with a new, and relatively risky, start-up just getting going banks may not be interested in providing a loan.
- Technology grants – some business support organisations provide grants for companies to develop new products (with the money usually coming directly or indirectly from the Government). However these usually require assurances about the sustainability of the operation, which can be difficult to give at the beginning when you have no track record.
- Investors – will provide funds to get a company going, on the basis that a successful company will return more money through an increase in company value….. however in return for their investment they usually want more of the company than you would like to give, especially the more risky the proposition.
The usual suspects often want to provide relatively large sums of money, and your idea might be too early to be able to easily justify such a big amount in its starting phase, or you may be able to access sizeable funds, but for a high price.
A useful question to ask is: can you get going cheaply with a modest pilot phase? A smaller sum that can help you proof the concept and principle of your idea, should be easier to find. Though don’t underestimate the time and effort required here too.
- The “bank of mum and dad”, the “bank of friends”, or your own savings. These sources require serious consideration about the likelihood of the money not being returned – there is more at stake than just a paper-based financial loss, as there are wider issues and relationships involved. But with an informed and open discussion this can sometimes be an option
- Crowdfunding – gathering a larger group of supporters who each contribute a small some each can be a way to get some funds flowing. The key to crowdfunding is that you need: a compelling proposition that the person in the street can connect with; and access to a large network, or the possibility of going viral. Having the time and effort to get this crowdfunding support is no small task.
- Some University and Innovation support organisations have proof of concept monies to help get you going as long as you can show the potential for your idea to be a success.
Have your next goal in mind
A key question to have in mind regardless of the sources is: how much money do I need to reach a significant development milestone, or to start generating revenue? Each investment should enable you reach a clearly identifiable landmark on your journey that helps to proof the validity of your idea de-risks it. A critical landmark for all businesses is when sales start and revenue is generated – the point of any business is about making sales. In addition the best source of investment is profitable sales! It may be that the first source of revenue isn’t your final product, or service, or that it isn’t at your final price point. But if you can shape your plan to bring in revenue as soon as possible that can make it less risky for everyone, reduce the size of the initial challenge, and make it far more likely that you will convince funders to part with their money.
When you have money to spend
When you start making or spending money you need to ensure the right accounting and assurances are in place for your product – professional accounting advice to get you on the right footing can be invaluable. Once you have money in your hand you will be amazed how easy it is to spend it… and spend it badly. Keeping costs down helps the money go further … so glamorous offices, expensive branding and marketing, large salaries all add to the ongoing challenge of finding money to grow the business. A considered approach to the spending priorities that will get you to the next step are invaluable, it will help you raise the right amount of funds for the next stage: too much funding means you will probably be paying over the odds for it, too little will mean you and your business will run out of fuel and be brought to a stop.
Dr Stuart Wilkinson is the Head of the Knowledge Exchange and Impact Team (KEIT) in Research Services, at the University of Oxford. He is a technology & knowledge transfer professional, experienced in working with world class researchers to take new ideas and innovations into a commercial setting; and in developing strategic partnerships and collaborations to enable innovation to have a greater impact.