Most start-up companies require several rounds and types of financing over the course of their development. The amounts and sources of finance you require for each round will vary according to your business stage, specific project requirements, as well as how much control of the company you wish to retain. Your responses to the questions in the Navigator will help identify financing sources that appear to be most appropriate for your business needs.
At what development stage is your company? Different stages of business development will attract different types of funders. This is because funders vary in scale, appetite for risk or desired outcomes. The five stages of business development used in the Navigator are based on those used widely within the fundraising industry1:
i. Idea – As an ‘idea’ you are typically developing your proof-of-concept or prototype, and may have just a few employees.2
ii. Seed – As a ‘seed’ company you are probably seeking modest amounts of capital for the early development of a new product or service.3 Finance may be directed towards market research, building a management team and developing a business plan.
iii. Early – As an ‘early’ company you are likely to be looking for finance to expand manufacturing and sales activities, as the concept has now been developed into a product ready for sale. You are still likely to be a small-sized company, having just a handful of employees. Many early-stage companies have been in business less than three years and have a product or service in testing or pilot production.4
iv. Mid – As a ‘mid’ company you are looking for finance to expand and mature, possibly to increase market share or develop new markets.
v. Late – A ‘late’ company may be ready to be floated publicly via an IPO (initial public offering) or corporate acquisition. At this stage it is likely that you have been established for more than five years, with a mature and stable business model.
Which part of the UK are your operations headquartered? Some financing sources can be focused on supporting enterprises within a particular geographic region. Examples of this include regional government grant schemes and business incubation centres.
What is the approximate amount you would like to raise? The cost of innovation, development and deployment of cleantech technologies and low-carbon services can be high. Companies in these sectors often need significant levels of financing to support commercialisation. If you need to raise a large sum it may be more appropriate to approach a number of different funding sources and to do this over multiple smaller investment rounds. If this is the case, it might be worth considering smaller investment organisations alongside other options to compare the costs and benefits.
What type of finance are you looking to receive? Some funders may be able to provide ‘no-strings-attached’ funding, but these opportunities are rare. Most will require either repayment, a stake in your company or a combination of the two. It is important for you to decide how much ownership of your company you wish to retain and the risk associated with different financing options. It is also important to consider the amount of time required to secure each source of finance:
i. Loan – A sum of money which is borrowed and is expected to be paid back with interest over an agreed time period. In some cases loans will be secured against assets and these assets could be at risk if the loan is not repaid in full.
ii. Grant – Typically, you do not have to repay a grant. However, the sums associated with grant funding will often be smaller. There may also be conditions on how you can spend this money.
iii. Equity – A share in the ownership interests in your company. Whilst, in most cases, there will be an expectation of a return on this investment, this is not guaranteed. The funder is therefore sharing both the risks and the benefits associated with the company’s performance.
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The Shell Springboard Access to Finance Navigator is a digital database of investment sources most applicable for enterprises in the low-carbon, cleantech and sustainability sectors. It is an interactive tool to help companies identify funding opportunities most relevant to their sector, development stage and financial requirements.
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