After the UK announced it was leaving the EU, the financial implications of this vote included a slowdown and a pull out by venture capitalists. The most significant of these pull-outs was the European Investment Bank (EIB) which left a hole to the tune of £2 billion. This gap in venture capital means UK start-ups have to become more creative in raising capital, hence the leaning towards crowdfunding.

How different is crowdfunding?

In the typical setting, a start-up will raise capital by working through stockbrokers and investment bankers, who assess the value and then advise venture capitalists to invest in the start-up. This approach has been the norm world over. It is a win-win for everyone; the start-up gets the money, and the venture capitalists invest with reasonable risk.

The problem with this model is that with a squeeze in venture capital as has been seen in the UK, there is a lower appetite for risk, which makes it harder for start-ups to raise money.

Crowdfunding cuts out the stockbrokers and investment bankers to reach out directly to the man on the street. This idea has been happening for a number of years with crowdfunding sites like Indiegogo, Kickstarter, and GoFundMe. These sites are permitted to raise funds for pre-sold items.

Studies show that the average Equity crowdfunding pitch in the UK is £200,000 while the average investor is willing to put in £1,500. There is clearly a big gap in funding needs and what is available.

Hesitant investors

But equity crowdfunding is not catching up as fast start-ups in the UK need it. This is largely due to risk averse investors. The equity crowdfunding model has been likened by some to the South Sea hype of the late 19th century in which numerous investors lost money in hyped up oil investments in the South Sea. But this is largely due to investor ignorance on this model.

However, there are good examples of equity crowdfunding that have had somewhat limited success in crowdfunding. The medium scale London based Camden Brewery, makers of Hells Lager, managed to raise £2.8 million on CrowdCube. Another business, EasyProperties was able to raise £1 million. While these businesses raised capital below their valuations, this is a good show that start-ups can still hit the million mark when they offer promise to small investors.

Equity crowdfunding will surely catch up as more demand comes from start-ups that are promising to investors. For UK start-ups with capital needs over £1 million equity crowdfunding is one of the viable options on the table.

When many people are asked why they did not pursue their entrepreneurial dreams, they will say they failed to fail. Society has painted failure as unacceptable and for losers. The society conditions people to hide failures. Glossy pictures of successful people showing off their glamorous lives on social media put s even more pressure to live life on the straight and safe path where there are minimal risks, and failure is far away. But failure is good. It enables those who have failed to learn from mistakes and gain valuable experiences. Here is why you need to fail to succeed.

It takes away the fear

Failing is like falling sick. It makes you immune to fear to fail. Before one fails, there is the fear that failure could to loss of everything that it is impossible to recover from a fall. The sooner you fail the sooner you realize that you have been living in fear. You become bolder in your undertakings after realizing that it is always possible to recover from a fall, and that getting up on your feet is the more important thing than focusing on the fall.

Failure helps to perfect

You have to observe Olympic athletes to understand the concept of perfection. You have to work hard to perfect your act overlooking defeats, injuries and setbacks until the moves are perfected. Failing helps point out whatever it is that you are doing wrong, and do it better next time. This is how great ventures are made.  Great entrepreneurs like Steve Jobs failed in some ventures but used the lessons in their failures to perfect their other ventures.

You come out stronger

Experiencing failure tests your character in the face of adversity. Whatever lessons you learn from failure in one area, whether professionally or in personal life, you can apply the lessons in other aspects of life.

The trials and errors in   entrepreneurship eventually lead to a methodology that you can rely on in the future. The process of recovering from failure is able to empower you to trust other people and take chances with opportunities that come your way.

Failure can help you decide on your vision

Failure forces you to ask questions on why the failure happened. You reassess your vision and look at it afresh. Was it the right vision? Did you fail because the vision was wrong or your path of action was wrong? Is that vision worth the pain of failure again? If it is then you have a passion to perfect it and you can work on making it successful.

The UK is still one of the most attractive destinations for start-ups. According to a report by Telefonica released in April 2017, there are about 3,660 start-ups annually in the UK. The people starting up these ventures are of a diverse make-up which includes native Britons as well as people from around the world, both male and female. Talking to the CEOs of these start-ups gives an insight into what drives them and their secret to success.

Start-up- Just Add Beauty – www.justaddbeauty.com

CEO – Samantha Freedman

Just Add Beauty is a beauty curation site that helps people find beauty products by allowing the like-minded websites to sell these products.

Samantha Freedman says that having worked in the beauty industry for over 10 years as a beauty and fashion journalist, venturing into the world of fashion came naturally to her. Just Add Beauty was officially launched in January 2018 and is working with beauty brands like By Terry, Benefit, Malin+Goetz. Here are a few questions put to Samantha

What motivated you to start the business?

Samantha says that the idea was to build a new online beauty shopping experience, where customers would be buying beauty products based on curated and expert-led opinions.

What is the business about?

Beauty shoppers are able to buy the best products based on like-minded expert opinion instead of the confusing affair that shopping usually is.

Start-up- Qlearsite – https://www.qlearsite.com/

Co-founder – Peter Clark

Qlearsite is a tech start-up that aims to give organizations insight into their staff based on evidence-based data. The venture was started in 2014 and is working with big names like Virgin Media and Deloitte.  Peter Clark answers some questions on the venture.

What is the business about?

Qlearsite uses predictive analytics and AI to help organizations understand their staff for better retention, work satisfaction and productivity, for example, the insight can tell a company exactly how many hours of overtime a certain worker should work.

How can companies keep staff happy?

Workers need to feel empowered instead of feeling pressured. The marketer who has a six months deadline will feel threatened, but empowering her with a social media marketing course makes her feel more confident.

What is General Data Protection Regulation?

This is a comprehensive law to safeguard private information of EU internet users.  The consequences of not complying are really harsh.

Start-up -Doorstep – http://doorsteps.co.uk/

CEO- Akshay Ruparelia

Doorstep is a crowd-based approach to property selling. Instead of using a real estate broker in the transaction, the property owner pays only £99 to have the property sold by an expert. Here is what Akshay says about this venture.

What inspired you?

Akshay was motivated by the problems that his family experienced when he was young, paying high commissions for simple information. Doorstep is a venture to make real estate dealing easy and transparent.

The Z/Yen Global Financial Centres Index for 2017 ranked London as the top financial hub in the world, followed by New York, Hong Kong, and Singapore. This claim for the top spot coming even as Britain faces exiting the EU in April 2019. But London has consistently claimed the top spot except in 2013 when New York briefly took over, only for London to emerge top again in 2015 and continue the lead.

To see why London is always considered a top world financial centre, looking at the ranking criteria used by The Global Financial Centres Index gives some insights:

• Business sector environment

In the 1980s the UK introduced radical reforms that were popularly nicknamed the ‘Big Bang’ reforms by the Thatcher administration. These laws deregulated what had been restrictive laws for participating in global finance. The effect was that UK business was able to utilise the structures that had been laid by the British Empire and maintained by the Commonwealth. This allowed many businesses to do lucrative trade globally and repatriate funds to London. Even foreign firms found the financial regulations in London more favourable and set up headquarters there.

• Financial sector development

London no doubt has the most advanced financial sector in the world. The City of London financial district hosts the financial headquarters for a large number of the world’s top financial players including HSBC, Barclays, Standard Chartered, and Old Mutual among others. The London Stock Exchange is among the top 5 most traded exchanges in the world. In short, the world of banking, insurance, and stocks exchange converges in London.

• Infrastructure

London is uniquely positioned as a travel hub with many transatlantic flights making an almost mandatory stop at Heathrow. The city is also linked to continental Europe by rail, road, and sea.  London is also one of the few inland cities that has significant shipping activities thanks to the navigable River Thames.

• Human Capital

The UK is home to premier learning institutions including Cambridge, Oxford and the London School of Economics. These learning institutions, as well as others of high-quality learning, consistently churn out young graduates into the world of finance.

The UK remains highly attractive to young people interested in setting up start-ups, with a huge concentration of start-up incubation and acceleration programs based in the city.

• Reputational and general factors

As a city that is older than New York, Hong Kong, Tokyo and many others, London has a grand reputation as a city associated with stability, old money, and royalty. There are bragging rights to being based in the City of London.

According to the site Economics Help, youth unemployment in the UK was at 12% in 2017. This is for persons aged 16-25 years old. While this is a significant drop from 20% in 2012, it is still an unacceptable figure for a developed economy. This number counts people young people who are actively looking for work but cannot find it.

What causes youth unemployment?

• Lack of needed skills

More and more youthful members of the population do not have the skills that are needed in today’s increasingly global economy. A report done by the Centre for Cities found out that people with poor skills in math and English are unlikely to get a job. This is more so in jobs that require dealing with slightly technical work like drawing up reports.

• Over-qualification – This happens when graduate students find that the available jobs require relatively lower qualifications than they possess. Employers are often reluctant to take them as they are forced to pay higher wages.
• Real wage unemployment – Young workers face slow growth in wages. In 2017 the minimum wage was £5.60 for those aged 18-20 and £7.05 for those aged 21-24. These wages are below the national minimum wage of £7.50.
• Geographical unemployment – Youth in some regions face lower employment than in other areas. In the North East, the employment rate is 64% against 70% in the Northwest.
• Frictional unemployment – This happens when youth are idle in the transition between school and work
• Hysteresis – This is the phenomenon where unemployment causes further unemployment, for example, a person who fails an interview feeling demotivated to lock for another job.

What are the solutions to youth unemployment?

• Vocational training – hands-on skills are very effective in empowering NEET youth (Not in Employment, Education or Training). Short courses such as welding, motor engineering, and plumbing are effective in empowering lowly educated youth.
• Internship programs – Being on internship is very effective in giving a graduate on-the-job skills.
• Youth enterprise training and funding – A good number of young people would like to start enterprises but don’t know where to start or get funding. Youth enterprise training and funding programs teach the basics of business planning and running a business, and offer the initial capital to start these ventures
• Start-up Incubation/acceleration programs – Youth start-ups are faced with numerous challenges. Incubation/acceleration programs are targeted towards investing in these start-ups, providing workspaces, training, mentorship, and networking. These types of programs have proven very effective especially for tech-based start-ups.

Youth unemployment can be tackled with a multi-faceted approach involving empowering the youth with the skills needed for jobs as well as nurturing their entrepreneurial side.

As centers of learning, innovation comes naturally to the university community; students and the teaching staff alike. One of the leading start-up supporters, the University of California, has led to about 1300 start-ups since 1969, a majority of which happened after the year 2000 spawned by the tech revolution. In the UK, the University of Oxford has supported over 70 successful startups in its incubation program and helped attract over $40 million in start-up funding.

According to UBI Global, which is a start-up support service, there are different levels that universities support start-ups:

• University managed start-up incubators – These are directly managed by the university. The top university managed start-ups include The SETsquared Partnership (United Kingdom), DMZ at Ryerson University (Canada), PoliHub Startup District & Incubator( Italy), University of Toronto Entrepreneurship (Canada), Incubadora de Alto Impacto del Tecnológico de Monterrey Campus León (TEC LEAN) (Mexico)
• Incubators affiliated with University – These start-ups partner with one or two universities in the venture, largely in research. This is usually on a contractual basis. The top university affiliated start-up programs include Chicago’s Technology & Entrepreneurship Center (United States), İTÜ Çekirdek (Turkey), Uppsala Innovation Centre (Sweden), YES! Delft (Netherlands), IPN Incubadora (Portugal).
• Incubators collaborating with a university – There is no contract in this arrangement but a Memorandum of Understanding. The top collaborative programs include Guinness Enterprise Centre (Ireland), Montpellier BIC (France), Shell Iniciativa Jovem (Brazil), MIDI Tecnológico (Brazil)
• Start-up accelerators linked to university – These are entities supporting start-ups, and which are affiliated, linked or managed by universities. Some of these top accelerators include York Entrepreneurship Development Institute (Canada), Entrepreneuriat Laval Inc. (Canada), TEC Edmonton (Canada), and The Accelerator Centre (Canada)

University-affiliated business accelerators help start-ups grow in several ways:

• Investment – While many accelerators inject funds as an investment expecting a return, some will do so for non-profit motives especially for start-ups with social benefits
• Training and education – An acceleration program usually includes training and education on different aspects of turning the start-up into a viable business with support structures like legal services, financial management, HR services, Sales, and Marketing.
• Mentorship – Many acceleration programs will also have a mentorship program where start-ups are linked to experienced industry players for guidance on how the industry works, and how to respond to different challenges.

Business accelerators play a very crucial role in the life of a start-up they come in for a brief period at the early stages of a start-up bringing in crucial support in funding, intense training and offer real-life experiences in business for start-ups.

Entrepreneurship is a strange subject that has never been fully uncovered. Every entrepreneur travels a separate and unique path, some to great success, other to moderate success, and the majority to failure. While there is never a shortage of people willing to share their entrepreneurial journey there is also a good number of startup myths that every entrepreneur needs to debunk to see entrepreneurship for what it is, the challenges and opportunities. What are some of these myths?

Money equals success

A good number of budding entrepreneurs falsely believe that having adequate will automatically translates to a successful venture. But capital is a means to an end. It is supposed to facilitate the business run operations. A viable idea coupled with a sound financial plan is more important than being flush with cash. A sound business plan will always get a venture the capital needed.

A great product is all that is needed

A great product is probably the most important thing to a venture. However, even a great product cannot sell itself. It must be packaged and shown to have a place in the market. Investors must see that there is a demand for the product.

All startups become famous

While famous startups like Microsoft, Facebook, and HP went on to become giants with billions in profits, the truth is that the average startup will turn into a moderately performing business just like millions of other Small and Micro Enterprises that make up the bulk of businesses in the UK and around the world. However, with the right strategy, any venture can become a world-famous brand earning the founders superstar status.

If you sell they will buy

While optimism is important in keeping the faith in a startup, false bravery can lead to crushing disappointment. Simply putting the product on the market does not mean that the market will jump for it in their millions. Achieving good sales requires a sound marketing plan which involves generating leads, nurturing those leads and convincing them to buy. The hard truth is that   there is competition to contend with.

Entrepreneurs work 84 hours

While building a venture certainly does require work, hard work does not translate to smart work. Entrepreneurs do not have to break their backs for successful ventures. What a venture needs is a smart business plan that spells out what needs to be done, when it needs to be done and who is responsible for it.

Social media likes translate into money

Anyone can get a 100,000 likes. Translating these likes into real success is the real work.

While there are famous stories of businesses that have become highly successful with a fly-by-the-night approach, a huge majority of businesses that operate without a business plan are doomed to fail. Just like you cannot start a journey without a charted path and a destination, so will a business not find success without a business plan?

In simple terms, a business plan is the coherent thoughts about the business put on paper. It answers very crucial questions related to the planned venture:

• What needs to be done?
• Who will be responsible for doing it?
• When will it happen?
• Where will it be done?
• Why does it need to be done?
• How will it be done?

A business plan has several elements that help your investors and other interested parties. The crucial elements are:

• Executive summary – This is the whole concept in brief
• Company description – What is the venture about, who is behind it and what new does it bring to the market?
• Market research– Why does the entrepreneur think that the venture presents a good value to the market? Here is where the SWOT analysis happens to show how the venture fares against the competition.
• Description of the product/services – What is the business bringing to the market? How different is it from what is already in the market?
• Management/ operations – How is the venture to run? What business model will be used and what operations will be in place for efficient delivery of the product or service?
• Marketing and sales strategy – How will be the product/service be presented to the market? This involves branding, packaging, and pricing.
• Financials – This section goes into the nitty-gritty of the venture on the ability to generate revenue, break even and return a profit. The financials validate the venture.

Why does a start-up need a business plan?

• Does it make sense – Putting the idea on paper will help assess the viability of the idea. What might seems to be a good idea would have to be re-assessed if bringing out sections like the market research is difficult.
• Fundraising – It is easier to explain the concept while it is on paper. Potential investors want to go through it carefully and see if what is being pitched makes sense. A business plan can be disseminated to remote investors as well.
• Reference point – There are many events that happen in the early stages of a start-up. A business acts as a guiding beacon. Reviewing the business plan at different intervals helps determine if the venture is still on course.

The truth is that every start-up needs a business plan. It is beneficial for the founder, investors and other interested parties, as a foundation of the venture.

How the UK can Nurture Growth through Innovation and Technology

The UK has always been a giant in innovation and technology. Pretty much of the industrial revolution innovations started here. But in today’s world, the UK is somehow lagging behind in areas like artificial intelligence, cloud computing, robotics, Internet-enabled sensors, and genetics. These are the technologies that are expected to drive the next wave of growth in the world’s economy. Indeed, the UK is facing stiff competition from both developed countries like Japan, and middle-income countries like Poland.

Innovation scorecard

The European Union’s Innovation Scorecard puts the UK’s business population’s innovation ahead of the rest of European countries. But small businesses were lagging behind in innovation as compared to small businesses in other European countries. The scorecard reported that an estimated 30% of EU SMEs have introduced a new product, or improved an existing one. For Finland, Belgium, Germany, and the Netherlands, this is 40% of their SMEs. For the UK it is 28%, which places the UK at number 24 out of 34 countries.

This even as a report by Goldman Sachs, the Enterprise Research Centre (ERC) and the British Business Bank (BBB) says that the SME sector will drive about 70% of long-term growth and over 50% of labor productivity.

Innovation and business survival

There is a direct correlation between innovation and business survival. Businesses that are more innovative are able to improve their products to match customer expectations, and also change their business models to match the prevailing conditions in the business environment.

Innovation and exports growth

Innovation is a key driver for promoting exports from the UK. According to the UK’s Trade and Investment Authority, SMEs benefit from higher competition, scaling effects, and learning-by-exporting when they engage in exporting their innovations.

According to the same study, businesses that innovate are 7% more likely to get into the export business than businesses that are non-innovative. They are also likely to grow twice as fast.  There is also a reciprocal benefit in that business that are active exporters are 3 times as likely to innovate a new product in their sector.

With the right support 9-12% more businesses could get into the export business as they possess the profile. This number is more than 120,000 SMEs which could add around £1.15 billion to the UK economy.

Innovation in attracting capital

With equity and venture capital funds assuming a global look, this capital is moving to economies that are innovative. The UK can only attract capital if there are meaningful innovations in the third internet wave of technologies mentioned at the beginning of this article.

How Can UK’s Start-up ecosystem be accelerated?

A report commissioned by Telefonica and published in April 2017, the UK’s start-up ecosystem is vibrant and diverse. The report stated that UK start-ups had grown by 80% since 2011. Among the more notable happenings on the tech startup scene have been Ascenta, which was bought off by Facebook, Deepmind Technologies which was acquired by Google, and Semetric which was acquired by Apple. UK start-ups are performing well but in today’s third internet wave with areas like cloud computing, there is still room for more innovation.

Another study by research firm Nesta found out that in 2016, there were:

• 205 incubators
• 163 accelerators
• 11 pre-accelerators
• 7 virtual accelerators

An estimated 3660 new businesses are being supported by these entities each year, with an estimated £33 million in start-up capital being raised annually. Most of these entities supporting new businesses are in the big cities of London, Bristol, Birmingham, and Manchester.

How can the start-up ecosystem be raised to a higher performance level, able to support more start-ups that become viable and sustainable businesses?

• Training

Many startup founders have brilliant ideas in their field of expertise but know little about how to set up a viable business. Offering training on the basics of business planning, fundraising, financial management, sales, and marketing enables start-ups to put in place the structures needed to become viable businesses.

• Workspace

Many start-ups face the challenge of having a workspace, be it an office or a workshop with the right equipment and tools. Providing a working space with the facilities needed enables start-ups to get to work without having to invest in these costs.

• Networking events and demo days

A start-up looking for capital needs to showcase what it is offering to interested parties. Networking events bring together industry players who include older businesses in the sector, and prospective investors. They get to meet innovators face to face and listen to different ideas.

• Legal support

Safeguarding intellectual property rights is one of the biggest challenges for start-ups. Providing legal services helps safeguard these rights as well as help start-ups skirt around risks, for example, modelling products too close to trademarked products.

• Mentoring

Connecting startup founders to people who have been in similar position and succeeded is important in passing on information and knowledge that cannot be acquired in formal training. The start-ups are able to handle different challenges better by depending on this wisdom.

The UK start-up ecosystem is one of the most vibrant in Europe and in the larger world. Entities that can offer acceleration to these start-ups will get into unique win-win situations.