2. Continuous funding

Due to the changing size and nature of investments from angel investors, a more recent trend is to have an open-ended funding round rather than big "raise events" such as seed stage, early stage, series A and B rounds etc. 

SeedLegals, the UK's largest legal platform for startups, is one of the pioneers of “agile funding”. This article by CEO and co-founder Anthony Rose explains why agile funding is likely to be the future of startup investment, and how it’s already transforming the way startups are building and growing their businesses.

In the year ahead it may be a good idea to make investor relations an ongoing priority for your business so that you're able to nurture your existing investor community, but can also establish a continuous pipeline of new investors which you can tap into for support as your business develops.
​
3. The rise of equity crowdfunding

Equity crowdfunding has been growing over the past several years. Many thought it was a fad or just a short-term trend, but it continues to surge in popularity. The World Bank predicts that investment crowdfunding may be worth up to US$96 billion a year by the year 2025.

Importantly, an estimated 50% of current crowdfunding investments come from professional investors and institutional investors who trust equity crowdfunding platforms such as Crowdcube and Seedrs. So when looking to raise investment for the year ahead, it's worth utilising these powerful crowdfunding platforms for your own business.

There are other emerging trends that will make it much easier to finance your next stage of growth. Join us this month to learn the latest approaches to attracting the right investors.

​You can fight the tide and swim upstream, or ride the wave of these new techniques for raising capital and enjoy a prosperous New Year!
 
Paul & The Funding Game team.

P.S. If you'd like to create some real momentum for your startup or scaleup business in 2020, join me and angel investor Colin Coghlan at the British Library’s Business & IP Centre on Friday, 24th January for 'How to Attract the Right Investors' – our popular half-day workshop that will put you on the fast track to funding. Other dates available.

​It might seem like a long way off, and perhaps you shouldn’t be thinking about it right now. Let’s face it, you don’t have a crystal ball, and when you’re starting a new business you’re struggling to identify what’s going to happen in the next few months, let alone in the next five years.
 
But first, let me explain what I mean by “exit”. There’s a bad exit – which is when the business goes bust. And there’s a good exit – when you either sell the business to another company, particularly one larger than your own, or perhaps you do an IPO, so you sell the company shares to the general public. More likely though, an exit is going to be a trade sale. In around 80% of cases this is what will happen.

​Investment
 
The way you respond to the question “to exit or not to exit?” will help you decide which type of investment you should be going for to help your business grow. If you answer: “No, an exit is definitely not for me. I want to keep my company and grow it over time. I'd like to turn it into a wonderful lifestyle business – and maybe even pass it down to future generations in my family", then seeking investors is not going to be for you. However, investment from family and friends, reward crowdfunding, or debt-funding from a mix of small loans, could be suitable.
 
But investors? They love exits. Why do they love exits? Because that’s the only way they’re going to get their investment back with a healthy return. Many investors are looking for ten times their money back in about five years’ time. And due to the nature of the risk of small angel investments, this is the best chance they stand of making money from their investment portfolio.

Dividends
 
And, by the way, investors are not interested in dividends. Why? Because there’s no way they’re going to make a return on their investment after many years of you deferring profit, or re-investing profit – and when you finally issue the profit, it’s pretty small. That will never compensate them for investing at the highest level of risk.
 
So, think about it. Businesses grow up like children. At the outset, they need a lot of attention and careful nurturing. Then, as they grow, they start to become more independent, and eventually they’ll (usually) leave home. Ask yourself: do you want to hold onto your business for the rest of your life? Perhaps you do, and there’s nothing wrong with that. But perhaps you think it’s a good idea that, one day in the future, you’d like to release your company to other possibilities.

And so, if your answer to the question “to exit or not to exit” is “yes – I’d eventually like to sell my business”, then angel investors, equity crowdfunding and venture capital are most likely for you.

How you choose to fund your company will determine its prospects and chances of success, and there are some fantastic benefits to self-funding. Starting a business with very little financial resource focuses entrepreneurs on making money over spending it, and fosters a great deal of creative thinking.
 
However, lots of entrepreneurs take self-funding too far, reluctant to reach out to investors for fear of releasing equity in their business and losing control over decision-making.

While holding back from broader investment has some advantages, it has substantial disadvantages too.
 
For many entrepreneurs I’ve coached over the years, funding from outside investors is without doubt one of the fundamental keys to their success.
 
Why? Well, often, in the early stages of their set-up, entrepreneurs want to take control of as many aspects of their business as possible, becoming heavily involved in lots of things that they’re not necessarily good at.
 
At best, this means they have a handle on how their business is progressing and all the decisions related to it, including where to apply their efforts and energies.
 
At worst, it can lead to burnout. It can kill enthusiasm for their enterprise, slow their growth, and reduce their freedom to work on the business in the way they’d like.
 
Investment can free up entrepreneurs to focus on what they’re good at. It allows them to hire trustworthy people to bring in new skills and ideas, and to grow the business more rapidly once they’re clear on the model and the direction they’re going in. And, of course, funding can also open the door to mentorship, credibility and solid advice from investors, as well as access to their networks of contacts.​

I’ve written before on the huge benefits of self-funding and when it can be the right approach for a business, based on various factors such as available cash and resources, market conditions and expected rate of growth.
 
However, as soon as you have proof of concept, it’s wise to consider whether going for funding right away may be the better option for your business. Raising capital with a purpose can not only transform the way you work day-to-day, but it can provide an essential stepping stone to the growth and success you really want.

Find out the best ways to raise investment for your business at my next event How to Attract the Right Investors on Thursday, 9th November, 10am-2pm, at the British Library's Business & IP Centre, with guest speaker and Business Angel, Colin Coghlan. Other dates are available. Connect on LinkedIn, Twitter or Facebook for special offers.

​Having hit their minimum target of £300k in less than three days of their campaign going live with Crowdcube, the Onedox team decided to apply a stretch target.
 
Within 26 days they had smashed their stretch goal of £550k and closed their campaign early, just before the start of their Shareholder Party. No better timing than that! 🙂
 
I was thrilled to play a part in their journey, and am absolutely delighted for them because they can take their business so much further now.

The Onedox campaign owed a lot of its success to the “voice” of its founders David and Hugh – their voice is authentic, credible, personal and compelling.

​I can’t overstate how important it is to have a voice that resonates with the crowd you want to engage. The Onedox team understood this very quickly and it helped them galvanise a large proportion of their existing customers and investors, many of whom bought into their vision and what they stood for, and then put their money behind them.
 
The phenomenal support and feedback they received during their campaign will serve them well as they continue to grow their business in the coming months, now confident that their flourishing community wants to hear more of that voice.

Great post from Dan Kelsall, Founder at Vonkel, on the ridiculous jargon you'll encounter in Startup Land! ​https://goo.gl/2ujk2H