More entrepreneurs looking to alternative sources of funding
UK entrepreneurs have high expectations for 2019 – with over half (51%) expecting to increase their revenues by 50% – but many are facing an uphill battle when it comes to funding business growth.
That's according to EY’s latest Fast Growth Tracker, a regular survey that tracks the outlook amongst leaders of some of the UK’s fastest-growing companies.
The research shows that finding suitable investors continues to be an issue, with over a third (37%) of the 380 founders and executives surveyed struggling to find a match for their enterprise.
Three in four (75%) entrepreneurs still favour traditional equity financing via venture capital firms, but alternative options are becoming more popular. Notably, crowdfunding is now seen as a more viable funding source (cited by 20%) than traditional bank financing (19%).
Richard Goold, EY’s Fast Growth Leader, commented: "The good news is that there are more sources of capital available to fast-growth, entrepreneurial companies than ever before. In the last couple of years we have seen the number of funding options multiply, which has prompted some business owners to opt for a hybrid funding model – using crowdfunding to supplement venture or angel capital, for example.
"When it comes to funding, the main challenge for the entrepreneurial community is supporting start-ups with capital, in order for them to scale-up. Some investors seem unwilling to take the chance on businesses that are still in the seed stages of growth, perhaps because of the level of risk involved, but in reality they are often the ones that need it most."
The Tracker also found that entrepreneurs are becoming more hesitant to look internationally for investment. In the last 12 months the desire to target overseas investors has dropped by 10 percentage points, down from the 62% recorded in 2017.
Asked about their longer term plans, two thirds (67%) of business owners said they expected to exit their business within five years, but only 22% said within the next three years. This compares to 30% in 2017, which suggests that Brexit and heightened levels of uncertainty could be impacting their timetables.
"Reassuringly, the Tracker demonstrates that there is still a strong desire to start-up and build companies in the UK," Goold added. "Entrepreneurs still have a positive and opportunistic outlook, predicting growth and new hires in the next 12 months. However, unsurprisingly entrepreneurial aspirations are being curtailed by current market volatility and political uncertainty.
"This could see entrepreneurial flair being dampened by a touch of realism and pragmatism, reinforcing the importance of the private and public sector working together to maintain a supportive entrepreneurial ecosystem in the UK."
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