As most new business founders would agree with, having a clever idea and turning it into a product or service is just the beginning for a tech startup. If you want to grow fast then you’ll inevitably need to secure investment funding which is a more time consuming and difficult task than most people realise.
London's booming tech industry has enabled us to keep the title as the number one tech hub in Europe. This has also made the UK the main hotbed for sophisticated investors as well as being the place where US-based investors first look to when searching for investment opportunities in the European tech market.
There are more opportunities than ever for startups to secure funding whether it’s traditional bank loans, angel investors, government grants or VCs, everyone has its pros and cons. Many startups and even more established businesses are taking matters into their own hands and looking at crowdfunding options. For many it’s a simpler and less stressful way of securing funding than by going through more traditional routes and VCs.
Alternative finance is spearheading a finance revolution that’s currently changing the way we borrow, lend and give money; a method that’s radically transforming our relationship with finance providers by giving alternatives. With the flexibility that comes with it, alternative financing has quickly become the first destination of choice for capital raising amongst a new generation of startups looking to leverage the ‘power of the crowd’ to fund new innovations and ideas from entrepreneurs.
One company, Escape the City, a UK based website that, as the name suggests, helps City professionals escape the City, became famous by turning down VC investment in favour of raising £500,000 through the crowdfunding platform CrowdCube. And it turns out, from a startup point of view, a crowdfunding campaign is as much a PR exercise as it is capital raising, with both playing a vital part to the actual launch strategy.
Without a doubt, alternative finance has had a far-reaching impact by making it possible for anyone with a viable business idea to raise capital, but also for anyone to become an angel investor. On the one hand, one could argue that it’ll make it easier to enter the market, allowing for more experimentation to take place. On the other hand, skeptics argue that those companies that go down the crowdfunding route are companies that may not have got funding from traditional routes.
The success of these alternative sources of finance will ultimately be dictated by the success of the companies being funded. After all, if this new generation of crowdfunding investors don’t get a decent return on their investments and we don’t start seeing some stellar growth from the companies being funded then this new phenomenon may have a short shelf life.
I guess the only thing we could do is wait and see – time will tell.