Start-up funding failures show the need for innovation

Holly AbbottUncategorized

rocketThe Times is reporting that 4 out of 10 start-ups are denied credit from traditional sources.

The report highlights that 37% of start-ups are denied credit within their first two years of operation. The report claims that high street banks often lack the capability to provide small businesses with both the funding and the advice that they need, restricting their ability to grow. This leaves start-ups overly reliant on credit cards, personal savings, family loans and bank overdrafts.

This emphasises the need for innovative, alternative sources of funding for start-ups and SMEs. Schemes such as the Start Up Loans Company, typically delivered through partners such as Virgin Start-Up, are an example of this. The Start Up Loans package includes not just financial backing, but a coaching service too. Virgin also have their Voom programme, which awards financial support following a competition process.

Crowdfunding is also becoming increasingly prominent in backing for growth businesses, not just start-ups. Indeed, even the likes of Steve Smith, the founder of Poundland, has sought backing from crowdfunding for some of his latest projects. Of course, crowdfunding is as subject to due diligence and risk of falling through as normal lending.

The Times report emphasises advice, as well as funding, and highlights high street banks as being particularly week at this aspect. There are moves to correct this though. Natwest is well under way with its Entrepreneurial Spark programme, which it backs along with the likes of KPMG and Dell. Entrepreneurial Spark gives entrepreneurs access to resources such as mentoring and their ‘Hatchery’ space.

For our part, we at Spirit Ventures are currently working on developing the Eden Foundation, a not-for-profit division that will focus on backing budding entrepreneurs in our local community in Worcestershire. As well as financial backing, we will provide a mentoring programme a comprehensive support package in partnership with a range of like-minded local organisations. Successful applicants will also get access to our acclaimed internal Management Development Programme, and our prospective Leadership Development Programme.

At a time when traditional credit streams seem to be falling short in backing start-ups and growth businesses, there is an opportunity for inspired individuals, businesses and other bodies to step up and innovate and back our entrepreneurs.