Mawuli Ladzekpo is a former VC, and now coordinates startup loans at the Brightside Trust. In his first column he outlines alternative ways to get your startup off the ground.
Tick, tock, tick…
It’s a curious numerical coincidence: about 260,000 minutes have elapsed since this year began.
And, in that time, about 260,000 startups have registered as companies.
There’s one born every minute. Literally.
At this rate, 2013 is set to be record breaking year for new startup creation. Like last year was.
Programmes such as the Government’s £110 million Startup Loans programme, which provides early stage entrepreneurs with up to £10,000 to get going, are part of the reason more people are starting businesses.
In contrast with other traditional forms of finance such as angel investment or venture capital, “social investment” programmes like Startup Loans tend to offer loans to a broad range of people: first-timers to serial entrepreneurs; or bedroom-entrepreneurs attempting to start the next Instagram.
I receive applications from entrepreneurs from a wide variety of backgrounds and industries on a daily basis.
I am proud to have helped people get started who have otherwise struggled to find any funding.
Here’s what worries me though.
When that entrepreneur who has received this initial funding from us discovers they are on to something, where can we point them to for further funding? Or if a recipient needs an extension of financial runway, what can we do for them then?
Bank lending to small businesses remains weak.
The UK business angel scene is notoriously fragmented, and there is a question mark over whether it has the capacity to support the current rate of startup creation.
Venture capitalists typically look to invest seven-digit sums into companies that will yield a 10x return on investment.
The vast majority of the 260,000 startups birthed this year – or any year – simply won’t have that profile.
Social enterprise funds such as Bethnal Green Ventures, Big Issue Invest’s Tech for Good Challenge and UnLtd are brilliant schemes.
That said, they are expressly aimed at social enterprises as opposed to startups in general.
New, innovative forms of funding such as crowdfunding are still in their infancy.
This doesn’t leave very many options left does it?
Admittedly, not every new company will need external funding. Many will sustain themselves the good old fashioned way, namely by selling products customers pay for.
Not every new company will want to keep going after a certain point. There will be a natural amount of attrition, so a funding crunch is not necessarily inevitable.
But as numbers of new businesses created creeps up and up, we should acknowledge that this is still only a first step, and starting a business is a journey of 1,000 miles.
In the few minutes you’ve spent reading this, another two or three businesses have started. There’s one born every minute.
Don’t get me wrong. I’m glad they are born and I’m happy to play a role, however small, in bringing that about.
However all of us involved in helping new startups get going need to start thinking a bit more about how we can get them to keep going. That’s what really counts, after all.
I don’t have the answers. But we need to find them. The clock’s ticking.
…tock, tick, tock…
Mawuli Ladzekpo is the Startup Loans Coordinator at Brightside. Follow him on Twitter.