The biggest issue facing start-ups in 2015 is access to seed funding
Convincing investors to back your idea is the key challenge for every start-up, and usually an idea is pretty much all you have. Even a start-up that has some runs on the board, with a MVP product, customers and maybe some revenue, faces the challenge of convincing investors and lenders to understand the potential of their start-up business.
A recent DFK survey of the start-up sector in Australia & New Zealand confirmed that the hardest challenges for Aussie & Kiwi start-ups is access to funding. Raising money for start-ups is tough especially if you are just starting out with an idea or concept, few assets and no useful network for raising independent finance.
Cheree Woolcock, partner of DFK Australia & New Zealand says, “We see that some banks have been reluctant to lend to start-ups and online-only business, but I think banks also need to adjust to the cloud-business-world.”
Nick Reade, ANZ general manager of small business, was quoted in The Australian recently saying many banks don’t play in the start-up sector because: “there are a couple of hundred thousand new small businesses every year and we feel that ANZ need to be in that market.”
So what is Start-up funding?
Start-up or seed funding is a method of peer-to-peer financing for early stage equity investment in start-up enterprises seeking seed or establishment risk capital, especially in the rapidly expanding Internet based technology sector. Investors in effect are putting up funds and purchasing equity in or taking the option to convert loan funds to equity in the start-up business.
What is the purpose of Start-up funding?
The first stage and objective of any new start-up is conceptualising and developing a minimum viable product (MVP). For this they will need development capital or start-up seed funding of maybe $150,000-$500,000 to pay for systems development resources required to establish the new enterprise.
If the founders of the new enterprise do not have access to these funds themselves, they have to go beyond family and friends to external investors such as private retail investors, Angel investors, high-net-worth individuals and/or other successful entrepreneurs.
So where and how do you find start-up funding outside the banking system?
Since the GFC, the traditional banking system has been adversely impacted by the high underwriting and servicing costs associated with lending to small and medium sized businesses. Plus as we have seen from the comments of the ANZ and the DFK survey above, the banks are usually very reluctant when it comes to lending money to start-ups.
Consequently it has created an opportunity for non-traditional lenders through peer-to-peer lending and funding platforms to cater to the growing demand for alternative business financing options such as start-up funding by directly connecting start-ups and investors
Peer-to-peer funding lets investors lend to individuals or invest directly into start-ups or established businesses and uses low-cost online platforms to cut out the banks and other financial institutions.
funding4business has recognised this technological and cultural shift in investment lending and borrowing and is the first and only peer-to-peer marketplace in Australia and New Zealand, specifically established to facilitate start-up funding, crowdfunding, and business loans, by connecting Aussie& Kiwi business borrowers together with Aussie and Kiwi investors.
The funding4business marketplace is open and transparent peer-to-peer marketplace, where established Aussie businesses can source start-up funding affordable business loans, crowdfunded loans or start-up funding from willing lenders and investors at mutually acceptable rates and loan terms.
funding4business was launched in Australia on 1st August 2014 and in New Zealand on 26th January 2015.