Successfully launching and scaling a new tech venture requires astute funding and financing strategies. It’s a tough market, and the varied options, from bootstrap funding to venture capital, each has pros and cons that founders must weigh. Through smart financial planning and securing funding matched to your growth stage, UK tech entrepreneurs can fuel growth.
Bootstrap As Much As Possible Initially
The most accessible start-up funding source is your own savings and cash flow. Bootstrapping until you have an MVP and early traction preserves equity and control. Many founders bootstrap through consulting or client work to self-fund. Frugality, restraint on hiring and minimal overhead keep costs down. If able to bootstrap up to major milestones, future fundraising is easier.
Join An Incubator Or Accelerator
Leading incubators and accelerators like Ignite, Wayra and Barclays Eagle Labs offer funding, mentorship, and facilities to promising young tech firms. While highly competitive to get accepted, these structured programmes provide start-ups with investor connections, hands-on support, and access to capital. Even small seed funding at this stage helps tremendously.
Talk To An Accountant About Tax Credits
An accountant well-versed in UK tax code nuances can uncover tax relief options a layperson misses. For tech start-ups, common credits include HMRC R&D tax credits, SEIS and EIIS Relief, Patent Box credits, Employment Allowance and Video Game Tax Relief. But you must explicitly investigate and apply for these, as they won’t be automatically received. An accountant maximises tax savings. For more R&D tax credits information, get in touch with the team at Buzzacott. Buzzacott has been in the business for more than 100 years, and their tailored expertise can get your company where it needs to be.
Consider Crowdfunding
Crowdfunding platforms like Crowdcube, Seedrs and Kickstarter let start-ups raise small amounts from the general public. Besides capital, crowdfunding builds brand awareness and customer bases. Offering equity or rewards to funders requires careful preparation but opens access to capital. Set realistic goals and limit dilution.
Know When Equity Investment Is Appropriate
Equity funding from angel investors or VCs inevitably brings dilution and reduced control but enables big growth catalysts. Target series A after demonstrating product-market fit and initial traction. Be selective about partnering with value-added investors. Carefully manage fundraising to avoid excessive dilution. Know your metrics and milestones before pursuing a round.
Consider Revenue Share Models
Revenue share models allow start-ups to access upfront capital from investors in exchange for assigning a percentage of future revenue until the investor earns back their principal plus a return. This structure avoids giving up equity and eases cash flow until your tech business is generating sufficient returns.
Take On Business Loans Sparingly
Bank loans or overdraft facilities can provide financing when utilised prudently, and if you can find them. However, saddling a fledgling tech business with high-interest debt too early is risky. You should only take on what you can conservatively repay. If choosing loans, look for tech-friendly options requiring only interest payments initially or supporting asset purchases.
Leverage Purchase Financing Options
Purchase financing through leases, loans and payment plans can fund large capital expenditures on assets like equipment and vehicles needed for growth. Compare rates and terms across financing partners to maintain budget flexibility as opposed to large one-time capital outlays.
Mindfully funding growth without unnecessary dilution or burdensome debt is essential for UK tech start-ups. Savvy entrepreneurs explore a mix of bootstrap funding, incentives, crowdfunding, and equity financing at appropriate junctures. With mature financial oversight, tech businesses can flourish.