Business Finance Archives - Page 6 of 9

Asset finance explained

Posted on September 20, 2018 Written by Administrator

“Asset finance” is a term that is broadly used in business.

As a result, it can occasionally mean different things to different people. That, in turn, may cause some misunderstanding, so in what follows we will explore the various sub-themes arising from this term.

Asset finance

Strictly speaking, the term is used to indicate how the acquisition of a new asset is funded.

Let’s say a building company wishes to purchase a new JCB. They may approach a financing company to seek asset finance in order to help them make the purchase.

The actual products offered may vary. Perhaps typically they will include something like Hire Purchase (HP) but there might also be options including finance leasing and operating leasing.

Asset refinance

This term typically implies a company is seeking to raise capital using one of its existing assets, or perhaps more correctly any equity they have in it, as some form of collateral.

To use the same illustration as above, perhaps the building company owns a £100,000 piece of machinery on which they have outstanding finance to settle of £30,000. That gives them a rough figure of £70,000 equity that they can potentially use to borrow against, by discussing the position with a specialist in asset refinance.

Asset financing

This method is normally used in the same fashion as “asset refinance” but might more typically include assets that are 100% owned and which are being offered as some form of collateral for other forms of borrowing.

Asset bookkeeping (including depreciation)

This is an accounting term that essentially describes how the value of an asset reduces over time in the company’s books of accounts and how the costs of acquisition are processed.

The various options here needn’t concern us and neither do the accounting technicalities. What is important to recognise is that the method used to finance the acquisition of an asset may directly influence how depreciation/cost will be handled in your accounting.

This can have an effect on things such as your profit and loss reporting and your balance sheet. There may also be taxation issues.

If you are considering purchasing a major asset for your company, it is always advisable to discuss the position with your accountant in advance. They may be able to give you important advice relating to which method of asset finance might be most suitable for you, at a given time, from an accounting viewpoint.

Asset book value and asset disposal

The asset book value is again an accounting term used to indicate the notional value of your asset at a given time.

Asset disposal is, as the name suggests, simply the mechanism you might use for selling or otherwise disposing of an asset when it is no longer required. This may be linked to asset finance in the sense that if you have an asset that is not 100% owned by you, as is the case with HP agreements where you are still making repayments, you must not sell it without the finance provider’s advance permission.

Assets that you’re still making payments against are not your property. To sell them without due advance permission might be considered to be a prosecutable offence.

Summary

How you finance your assets and account for them can at times be complicated. There may be no absolute right or wrong solution, only what might be most advantageous to your company at a given time.

It would be advisable to speak to your accountant and a specialist provider of asset finance to understand more if you are considering acquiring significant assets for your business.

Finance options for business explained

Posted on August 28, 2018 Written by Administrator

From time to time, almost any business may find itself in the position of needing to raise finance.

Today there are numerous finance options for business available in the marketplace for doing so. In fact, there are so many that a brief article of this nature can’t cover all the business finance solutions available.

What can be explored though is the fact that the options you face may be dictated to some extent by the nature of your business. Here we will look at two broad categories of such lending – debt and equity finance.

Equity finance

If you are a new business, then you may find yourself in something of a dilemma.

The problem might be that you understandably have very little real trading history behind you to show that your business is successful and the risks of lending to you are therefore manageable.

As a result, new enterprises often look for what is called “equity finance”. This typically involves asking investors to inject money into your business in return for a share of it. That is usually done in the form of issuing shares or other financial instruments and that gives investors not only a direct share of your company’s profits but also, to some extent, a degree of say over how your company is run.

There are various ways of doing this, and perhaps the most familiar is the now widely-known “Business Angel” funding mechanism.

The very basic principle here is that as a new enterprise you are asking people to advance you money and take a much higher risk in doing so, given your lack of track record. As such, they will expect a higher return to compensate them for the greater risk they are taking.

Debt finance

This is perhaps more conventional.

It involves applying to an organisation for one form of loan or another. You will then repay the money advanced, over time, in line with a repayment schedule that you will have agreed with the lender or lenders concerned.

To secure debt finance, you will typically need to be able to show at least two years of relatively successful trading history. That will generally need to be in the form of recognisable formal accounts and preferably ones which have been signed off by a certified accountant.

Although the banks were once a significant source of this type of lending, in the last 15 years or so, they have been joined by new entrants. The new entrants may be able to offer a broader range of more flexible products – and also perhaps be able to respond more rapidly to your needs.

Generalities

In both of the above categories, lenders or investors may be somewhat more receptive to a business case that’s positive (e.g. growth related) as opposed to those which have an air of trying to salvage a failing business. Therefore your business proposition will need to be sound and well prepared.

It might also be worth considering what is called “asset re-finance”. This is essentially another form of borrowing which involves you leveraging existing assets that your business owns. For example, capital plant might be something you can raise a loan against, using the item as security.

In conclusion, keep in mind that investors or lenders will expect to see a proposition which clearly indicates that you understand and are in control of your business. If you’re unsure how to go about providing such, it might be advisable to take advice from an expert on how to go about preparing your case.

How to avoid faulty reasoning and improve returns on your investments

Posted on August 13, 2018 Written by Administrator

If we don’t invest the value of our capital and our purchasing power will dramatically reduce over our lifetime. Inflation will take its toll and our hard-earned the money will buy us less and less. Because of this not investing is not an option.

Deciding to put your capital into an investment portfolio can offer you an element of control over your financial future returns – if implemented well. Remaining disciplined through rising and falling markets can be a challenge, but it is this discipline is crucial for long-term success, ensuring that your capital value increases, at least in line with inflation.

The ideal solution would be to enter the market just as it bottoms and exit the market right at the top. But precisely timing your exit and entry is close to impossible. If it were easy, millions would be doing it and getting very rich in the process. In reality, the only ones getting rich in this scenario is the financial services industry – at your expense.

A useful insight came out of a seminar on market timing which I attended. The presenter suggested that over 20 years a £1000 investment made on in the FTSE All Share Index (from 1 January 1990 to 31 December 2009) would have grown by 8.06% per annum to £4,712.31.

Over the same period a £1000 investment in UK 1 month Treasury Bonds would have grown 6.15% per annum (to £3,301.29).

Had you had the ability to forecast one month in advance whether to place your investment into either the FTSE All Share Index or into UK 1 month Treasury Bonds, your investment would have grown by 30.51% per annum: from £1000 to £205,399.57.

As savvy investors you’ll know that the odds against calling 240 scenarios (every month for 20 years) correctly are massive. In fact they are: 1 in 1,766,847,064,778,380 followed by another 57 zeros.

As timing financial markets is clearly only available to those blessed with a crystal ball, I believe that becoming successful investors requires discipline. This means looking beyond the promises of well-intentioned discretionary fund managers and wealth management companies and making our own decisions.

Why investors lose money

Human instinct means that when we sense trouble we tend to react quickly without taking time for careful thought. When we see the market nosedive, the investor scared of losing his/her money, sells. The problem the investor then faces is when to buy back into the market. This of course means that you may lose any profit you have already made, and you run the risk of greater losses due to fees and the uncertainty of the market.

And remember, when markets are falling, stock prices are falling, you can only sell if there is a buyer to sell too. If a buyer is found, you should then have to ask yourself a simple question. If a buyer thinks the stock is cheap enough to buy today, why I am I selling it?

This is where the issue of the investor’s behavior based on their faulty reasoning comes in to play.

If you stay invested and the markets keep falling, you become anxious about the money you have lost when you could have pulled out earlier. If the portfolio value falls below what you invested you are now in a loss, you may become fearful that you will lose more of your money, but if you sell you will create a real loss. This loss if substantial it creates a real fear. Could you really afford to lose this money?

The worst scenario is that your nerve goes and you cannot hold out any longer and you sell at the bottom. After a few more months the markets begin to turn positive and the time for optimism begins, but you have been burnt and you will not be burnt again so you hold out… just in case it’s a false rise.

The market keeps climbing but you are still nervous about going back into the market. The media is now all excited talking about the ‘Bull’ run everyone’s making money, so at last you get you optimism back which is often too late, because all the gains have been recovered and you still have your losses to make up. You jump into the market.

Another downturn in the market… and the cycle of faulty reasoning goes on.

An alternative approach

The global market is an effective information processing machine; there are more than 98 million trades a day. The real time information they bring to the market helps set the market price.

Instead of buying retail funds selected by a fund manager buy a diversified basket of global index tracker funds and let the markets work for you. Holding a wide basket of stocks from around the world, linked directly to market returns, can reduce the risk of trying to outguess the markets or worse, pay somebody to outguess the markets.

Investment returns are random; they cannot be predicted with any great future certainty. Therefore, no one can say, with conviction, which financial sectors an investor should buy to get the next best return on their investments.

Therefore limiting one’s investment universe to a handful of stocks, or even to one stock market, is a concentrated strategy with high risk implications. Do not try and guess which parts of the world will outperform others, or whether bonds will outperform equities, or if large stocks will outperform small stocks; buy the global market using a diversified basket of index tracker funds and leave the speculation to the gamblers.

Ensure you have a cost-effective, low fee portfolio. Try to keep the costs of managing your portfolio under 1%. The industry average cost of using a conventional financial service company is in the region of 2.3%. If you save yourself even 1% a year you will have made a substantial amount of money using compounding interest over the life of your portfolio.

And don’t forget: be patient or learn to be patient. Don’t leap into action the minute the market starts to drop. Manage your emotions by investing in a risk portfolio that is a good fit for your personal capacity for loss, (rather than one based purely on your search for the highest returns). Always remember that you are doing this for the longer-term and the best financial future for you and your loved ones. A thoughtful and patient approach is the way to go.

ABOUT THE AUTHOR

Hannah Goldsmith is founder of Goldsmith Financial Solutions and author of ‘Retire Faster’. Hannah specialises in Low Fee Investing and is challenging the way financial services are delivered to consumers in the UK, by enabling each client to understand the nature of investment costs and the impact these costs have on their future lifestyle.

Goldsmiths complimentary ‘Second Opinion Service’ reviews investors’ existing portfolios and makes recommendations on Risk, Diversification, Performance, Cost and Tax efficiency, making investors’ money grow in a more transparent and financially efficient way.

Web: http://goldsmithfs.co.uk

Twitter: https://twitter.com/hannahgfs

LinkedIn: https://www.linkedin.com/in/hannahgoldsmith/

Facebook: https://www.facebook.com/GoldsmithFinancialSolutions/

What is P2P business finance?

Posted on August 12, 2018 Written by Administrator

Over recent years, one of the most talked-about methods of funding your business has been what is called “Peer-To-Peer” business finance – often abbreviated to “P2P”.

Here this method of business finance will be explored and explained.

Raising finance

Very many businesses, from the smallest to the largest, need to raise funding from time to time.

In the old days, this typically involved heading down to your local bank branch as a supplicant and hoping your bank manager happened to be in a good mood as you were making your case! Of course, those days are largely long gone, and there is now extensive competition and a wide variety of options for securing business finance.

Many of these are online and assuming the case makes sound business sense, and funds can be made available very quickly.

P2P

To some extent, this innovation owes its existence to the internet.

It enables a company in need of finance to apply for such to a wide number of private individual investors. Essentially the case is posted on to a website, and the public at large can decide whether or not they wish to invest in the proposition and if they do, how much and over what period of time.

For the potential borrower, this has a number of advantages:

it may mean that they are less dependent upon a single benevolent corporate-type investor;
it is relatively easy to operate and mostly devoid of the massive bureaucracy that can still sometimes arise with bank loan applications;
the cost of funding might typically be lower than that available from some sources of conventional business finance;
it is, arguably, quite a “trendy” method of borrowing and therefore the domain’s culture may contain a higher degree of across-the-board optimism from investors than might be the case through other more staid channels.

Of course, there is usually a flip side – and that needs to be considered too:

there is no guarantee that you will secure your funding and the results can be rather more unpredictable than might be the case with what might be termed “curated” applications managed through a specialist provider;
public investors can, at times, be fickle.

Nevertheless, this is an interesting potential route for business finance which should be explored.

How it works

Typically you will need to contact an intermediary who can offer P2P business case syndication.

Essentially that means they’ll look at your case and decide whether or not it has a certain minimum credibility and likelihood of success. If that is perceived to be the situation, your request will be added to the system and investors will be invited to join in if they wish.

There may be fees and commissions associated with using these sorts of central services, and this needs to be examined carefully in terms of assessing the cost-attractiveness of this approach.

Your proposition

There is a risk that this type of funding is perceived to be “easy”.

In fact, your proposition will need to be soundly produced and contain some compelling business metrics. This is typically only available to private limited companies and associated partnerships.

Remember that if your business case doesn’t make sense or appears to have an air of desperation around it, such as business retrieval, it may not even make it to widespread syndication, and even if it does, it may not attract investors.

It might be worth contacting a specialist in business finance to discuss this and other related options.

What is the relationship between blockchain and an ICO?

Posted on July 21, 2018 Written by Administrator

Blockchain and ‘Initial Coin Offerings’ (ICO for short) go hand in hand. If you want to understand the ICO and whether it’s right for your business, you first need to understand a bit about Blockchain.

Thousands of writers have attempted to explain the mechanisms of blockchain, and to varying degrees of success. It’s difficult to draw real world analogies, in part because 30 years of digital connectivity is fighting against millions of years of traditional analogue thinking. There is also a lot of misinformation and misunderstanding about what blockchain is and what it does, mainly from the old finance industries that fear blockchain’s transparency and ability to disintermediate. So here is my attempt to explain how blockchain works, using art as an analogy.

Even though we can all agree that there is only ever one original artwork, the printing press and other such analogue replication technologies allowed us to start replicating art, which we now regularly do by showing it in books, taking a photo or creating prints. It’s normally obvious which version is the original, or at least we tend to commonly agree on where the perceived value in the art lies, but the system isn’t perfect. Keeping track of the original is difficult because the system is open to forgery, so often authenticity comes down to the view of an expert. The internet and digital technologies have amplified these problems by allowing the replica to be shared a near infinite number of times. These simulacra sometimes devalue the original (but equally can increase awareness thereby increasing its value). Occasionally, the replicas realise a modicum of value in their own right (effectively by stealing the artist’s intellectual property).

But what happens if the artwork is created digitally in the first place, i.e. there is no analogue original? How would anyone ever agree where the value sits? What does it even mean to have a digital original? Is it down to the computer it was first created on? The original file? And that’s where blockchain comes in.

What is a ‘blockchain’?

In real terms, blockchain is simply a string of code combined with a ledger that’s shared with the public. If that segment of code is transferred from one owner to another, the entire public ledger records this transfer. No one can break the code without the entire ledger recognising it. So, it’s a technology that has been created to give a digital asset real-world properties, i.e. there is an original and anything else is simply a replica and has no value. So, going back to our art analogy, a piece of digital art created on the blockchain has an irrefutable original so the ownership and subsequent value of that original can be determined and agreed upon. Not only does it mimic the real world, it also improves on it, since everyone has transparency over all the transactions, so the system is almost completely immune to fraud.

This is why blockchain is considered such a revolutionary technology, because it solves the problem of digital replicability, and indeed takes it one step further by improving on real life transactions by creating a level of transparency and accountability that isn’t possible in an analogue world.

This is important because the problem of reproduction is not unique to art. Over centuries we’ve been trained to think that money acts like an irrefutable ledger. But that’s not really accurate. In fact, its value is subject to many forces and intermediaries. Cryptocurrencies are one application of blockchain technology; a digital currency using blockchain to allow everyone to see the entire ledger in a decentralised, transparent way. That way both the value and authenticity of the currency are clear. It’s unfortunate that most people first come across blockchain through cryptocurrencies, which has led them to believe all blockchain is simply a digital form of money. This couldn’t be further from the truth.

So how does this relate to an ICO?

An ICO is a way of raising funds that directly converts fiat currencies or other cryptocurrencies into a new token that you’ve created for your platform. You can think of it like ‘selling’ some of your code, since in a very real sense the owner will be the beneficiary of a slice of the blockchain you create. In our art analogy it’s like owning a small proportion of the actual (original, valuable) artwork, rather than owning a share of its value.

By understanding the relationship between Blockchain and ICOs you’re in a stronger position to decide if this route is right for your business. It’s certainly hugely popular right now – but take time to do your homework before you jump on the ICO bandwagon.

ABOUT THE AUTHOR

John Auckland is a crowdfunding specialist and founder of TribeFirst, a global crowdfunding communications agency that has helped raise in excess of £5m for over 30 companies on platforms such as Crowdcube, Seedrs, Indiegogo and Kickstarter – with a greater than 85% success rate. TribeFirst is the world’s first dedicated marketing communications agency to support equity crowdfunding campaigns and the first in the UK to provide PR and Marketing campaigns on a mainly risk/reward basis. John is also Virgin StartUp’s crowdfunding trainer and consultant, helping them to run branded workshops, webinars and programmes on crowdfunding. John is passionate about working with start-ups and sees crowdfunding as more than just raising funds; it’s an opportunity to build a loyal tribe of lifelong customers.

See: http://www.tribefirst.co.uk

Twitter: @Tribe1st

Finance options for business

Posted on July 17, 2018 Written by Administrator

Business needs finance. That is a fundamental fact of life.

Many businesses need to regularly seek external financial assistance for one reason or another. That’s as true for the SME as it is the vast multi-nationals.

Just where businesses searching for funding find success, depends largely upon their status and the reason they need a capital injection.

To prepare the ground, it’s worth bearing in mind that there may be two main generic finance options for business. You’ll be considering:

debt finance – essentially meaning borrowing and loans of one form or another;
equity finance – usually taken to mean selling a percentage of your company’s equity (typically in terms of shares) to an investor who might also require some degree of control over your development in the short to medium term.

Start-Ups

As a start-up or new company (here, we’ll take that to mean any business with less than 2 full years’ trading history) your business is likely to be perceived as “risky” to lend to – i.e. by potential providers of debt finance solutions.

It doesn’t matter how good things have been to date or how innovative your commercial proposition is, you’re not going to have much to show by way of demonstrable proof of your profitability over time.

As a result, you may find that solutions based upon equity finance are more appropriate than those related to debt finance.

Equity finance is often heard of in the context of “Business Angels” or related organisations. A Business Angel is usually a wealthy individual or a collection of such, who invest their money into early-stage commercial concerns.

They’re usually willing to take more of a chance than a traditional lender but as touched on above, they’ll also typically require a higher return and some control to reflect the greater risks they’re taking.

Approaching a Business Angel isn’t usually just a question of phoning up for an appointment. Many will only consider what they might term “curated proposals” – in other words, propositions that have already been vetted for credibility by one of their approved agents.

How much control a Business Angel might require over the company they’re investing in varies. Some may seek a relatively small percentage of the equity in the business and play a very much hands-off role. Others may seek larger percentages based upon their assessment of the risk/rewards involved and require active daily engagement in decision-making etc.

Established businesses

If your business has an established track-record as evidenced by a history of formal accounts, debt finance options for business might be more attractive.

There are multiple forms of such borrowing including things such as:

funding the purchase of capital equipment;
business expansion;
short-term bridging finance (e.g. if you have temporary cash-flow issues to resolve);

In some respects, these finance options for business aren’t dissimilar to personal borrowing in terms of what you’ll need to qualify. Typically, that will include:

some years of annual accounts that indicate the overall profitability and balance sheet stability of your business. This essentially tells potential lenders how much they can safely lend to you and be relatively sure they’ll be able to get their money back;
a cohesive and professional-looking proposal/rationale. This should ideally include a justification that the money is required for positive reasons, say business expansion, rather than simply trying to prop up a failing business for another period before the inevitable happens;
some indication that the proposer, usually the business owner or a key director, clearly understands the overall financial status of their business as it stands. They must be perceived to be in full control or some potential lenders may be dissuaded from going further.

It’s often prudent when considering finance options for business, to get some advice and guidance in advance on how to approach Business Angels or lenders.

Is an ICO the right fundraising route for your business?

Posted on July 17, 2018 Written by Administrator

Unless you’ve been hiding under a rock, you’ve probably heard about cryptocurrencies. The meteoric (and overinflated) rise of Bitcoin has firmly planted the disruptive technology in the minds of everyday consumers. And as a result, many companies looking to raise money for their business have probably asked themselves whether they should be running an ‘Initial Coin Offering’, or ICO for short.

So, what exactly is an ICO and is it a good way to raise money for your business?

An ICO is a way of raising funds that directly converts fiat currencies or other cryptocurrencies into a new token that you’ve created for your platform. There are two types of ICO: Utility Tokens and Security Tokens.

Utility Tokens

A utility token is one that exists simply to perform a useful task on your platform, akin to buying a painting to adorn an office wall (also think cars, stamps, jewellery or labour). In this instance a platform user won’t simply buy the tokens and sit on them (like a more traditional equity investment) – they will use them as part of their experience of your platform.

Security Tokens

These exist purely for speculators who hope to see a return on their investment, which is like someone buying an artwork from an artist because they’re betting on the value increasing (also think oil trading, rare stamps, precious metals or buying shares).

Obviously, there are grey areas – the painting on the office wall bought to beautify the space can increase in value if the artist suddenly became popular. Equally, the art bought for speculation was still originally created to be admired, interpreted and enjoyed, so the owner can argue that it has a function or utility. In other words, the ‘art token’ could be seen as both ‘utility’ and ‘security’. This is important to understand as the regulations surrounding each are different. So, whether you’re looking to build something that capitalises on the revolutionary factors of blockchain to improve the world, or building something that investors are expecting to rise in value simply by existing, I suggest you get a lawyer and professional help to ensure you remain compliant to your local financial regulations.

Why might I choose a utility token?

Based on existing regulations, an ICO is best suited for a company that has a clear utility need for blockchain. This list is by no means exhaustive, but these are the main reasons why you might need a utility token to support your technology:

You require complete transparency in the way you operate (i.e. a charity / a financial institution / a political institution / someone who handles multiple payments or acts as an intermediary)
You are an organisation that creates or requires regular contracts between two parties where the terms are incredibly clear, and you only want the transaction to take place once the terms have been met (aka a smart contract)
You have many digital assets and you want to give them real world, tangible properties, or so you know without doubt which one is the original

Is it right for me?

If you have not immediately recognised one of the attributes listed above in your own technology – then an ICO is probably not right for you. Even if you do think your solution has a need for underlying blockchain technology, it still might not mean you need to complete an ICO. There are many disadvantages to running an ICO over a traditional fundraise, not least because of the cost and regulatory concerns involved.

Of course, there are advantages as well. It’s a highly speculative and risky market for investors, but there’s a wild west, winner-takes-all feel to it at the moment. We’re in the midst of a dot.com 2.0 bubble and the next Googles and Amazons are likely hidden amongst the companies coming through. And there are a lot of investors who made a tonne of money in the cryptocurrency inflation now looking to diversify their rewards across a multitude of emerging blockchain innovations. So, even with the recent drop in market value, there’s still a lot of liquidity in the market. Some ICOs are raking-in huge sums of investment as a result.

In my experience, the founders who have the tenacity to succeed and an all-or-nothing mentality might want to consider an ICO. It will eat months of your life where you think of nothing but your venture for 20 hours a day, and will probably cause you to use up all your savings in the process. You also probably want to genuinely change the world and make transactions and interactions between companies and businesses more transparent.

If you fear this new world or are wary of risking losing anything, then a traditional funding raise is probably better for you.

ABOUT THE AUTHOR

See: http://www.tribefirst.co.uk

Twitter: @Tribe1st

Top tips for startups seeking investment

Posted on June 20, 2018 Written by Administrator

Entrepreneurship has never been so popular in the UK, with more and more people taking the leap to start their own business. In fact, according to CfE’s Startup Tracker, more than half a million new companies have been founded across the country every year since 2013.

Importantly, for many of these startups the time will come when they require investment to take their venture to the next level. Whether it’s R&D, developing a proof of concept, building a marketing budget or hiring new staff, a vast number of early stage businesses need injections of capital to enable them to achieve their growth ambitions and effectively scale-up.

Thankfully, there has never been a broader range of options available to entrepreneurs looking to raise money – there are banks, VCs, angels, family offices, private equity houses, debt investment providers, and crowdfunding platforms, to name just some of the more prominent ones.

But with so many potential avenues to explore, how can startups give themselves the best chance to raise the right amount of capital from the most appropriate source or sources?

Explore all the options

There might be great opportunities for startups seeking finance at present, but navigating the world of business investment can be daunting. Indeed, a recent survey found that only 57% of UK SMEs feel they have a good understanding of the finance options available to them, while 47% fear that external finance could result in them losing control in the way their business is managed.

Furthermore, while the number of investment options is expanding, so too is the number of early stage companies competing for investors’ attention.

As such, it is vital that young businesses explore all the options available to them, spanning both debt and equity investment – not only will this help them understand the pros and cons associated with each type of investment, but it is also likely that for larger funding rounds a company will require input from more than one source.

This was certainly true for GoKart in its formative years; from its launch in 2014 until now the business has secured funding from multiple organisations and individuals.

Our app – which enables restaurants to order ingredients from suppliers faster, more easily and for less money – was selected for Just Eat’s first ever restaurant technology accelerator, which included some investment. But this was also supported by backing from a number of high-net-worths (HNWs), including a Lord from the House of Lords, the founder and CEO of London restaurant chain Tossed, and chairs of Barclays, Credit Suisse and Morgan Stanley and the founder and former CEO of the UK’s largest food procurement company PSL.

From these various different sources GoKart has raised more than £525,000 to date. And it is vital for startups embarking on their first funding round, whether it’s pre-seed, seed or Series A, to begin assessing the full scope of options available to them. They can then pursue the ones best suited to the size and scale of their desired funding round, making sure not to limit themselves to just one source of finance.

Do you need more than just money?

When deciding which funding options are best suited to the startup – is it a lump sum from a single VC firm or backing from hundreds of retail investors on a crowdfunding platform – an entrepreneur must have a strong understanding of exactly what they want to get out of the funding round.

Specifically, one must ask whether it is only the money that the business requires? There are many types of private investment, including VCs, angels and HNWs, which will offer the startup more than just capital; these investors will offer mentorship, guidance, experience and expertise. A startup can end up with not just significant investment but also long-term support from people who sit on the board or act as non-executive directors to help nurture the business.

GoKart has seen the benefit of this first-hand – the aforementioned HNWs and industry heavy weights who backed the business early on have delivered much more beyond an injection of capital. They have been responsively on hand to offer support and guidance, making valuable introductions, and ensuring the startup is positioned to succeed.

Only go after the amount you need

The news today is awash with early stage businesses closing huge rounds of investment – multi-million pound deals that purportedly suggest the UK could have its next unicorn. The result is that entrepreneurs can easily be lured into thinking that they too must validate their venture by securing as much investment as possible. But this approach is often ill advised.

Firstly, a startup’s founder or founders will want to retain as high a stake in the company as possible; seeking equity investment will naturally erode away at the percentage they own. Not only do they want to protect their stake for their long-term profits and on-going motivation, but also because it is always likely that the startup will need to raise again in the future and this must be factored into the long-term division of company equity.

Ultimately, a business should be very clear and precise in establishing what it needs to raise finance for and exactly how much capital is required for this next phase of growth.

GoKart is currently undergoing its next investment round at present and this diligent yet uncomplicated approach has been pivotal to our preparation. With a fantastic team and experienced team of investors and advisors already assembled, supported by the experience of having gone through the investment process before, the team now benefits from knowing the right places to look and the right funding target to set. It will be incredibly exciting to see how this investment can further fuel GoKart’s progression as one of the UK startups seeking to disrupt their respective industries.

About the Author

Anx Patel is the CEO and founder of GoKart, an app that enables restaurants to order ingredients from high quality suppliers easily, quickly and for less money.