Disruptive start-ups key to growth

According to a recent report, disruptive start-ups will contribute greatly to the UK’s economic growth, with current disruptors contributing £196 million to the economy every year.

However, despite this enormous contribution, start-ups, particularly those started by younger entrepreneurs, are being held back, particularly when it comes to funding. This is because traditional financing routes are not a viable option.

In most cases, entrepreneurs are unlikely to secure an equity investment from a traditional venture capitalist (VC) because their idea is unknown, and the investor wants to see the idea de-risked to a significant degree. Meanwhile, loans for businesses with little collateral and cash flow are very thin on the ground.

However, there are alternative funding models available for young entrepreneurs looking to set up a business, but many are not aware of them. One such is Campus Capital, which is the UK’s first on-campus VC fund and operates in several universities across the UK. This fund enables students to present their early stage ideas to their peers for equity investment.

Under the scheme, undergraduates can present ideas to individual ‘business angels, who are often alumni and happy to invest in the next generation from their alma mater.

There are also start-up loans backed by the Government, which means that the lender will be repaid should the business fail. With an attractive interest rate of six per cent to borrow up to £25,000, around 60,000 people have already taken up this option.

Meanwhile, alternative funding, such as crowdfunding, is also proving popular with young entrepreneurs. In fact, some crowdfunding platforms are designed just for students and encourage alumni to invest.