Today AIN launches the first results from our 2024 Founder survey. In this article we deep dive into the results from our UK survey and what the takeouts are for startups seeking funding in a new climate.
To mark our 20th anniversary we launched a founder survey so we could hear from the founders across the network and take the temperature of startups in 2024. We wanted to gain a deeper understanding about your fundraising challenges, your successes and life as a startup founder. Today we are releasing the first set of findings from our UK founders.
The last few years have been especially tough for founders and one of the most significant hurdles for many startups has been securing funding. The findings of our survey of 225 UK founders shines a light on the complexities of this process. It reveals that many entrepreneurs need more help and guidance to navigate this maze.
Lack of understanding about the fundraising process
A clear finding was that there is a clear gap between fundraising expectations and reality. According to the survey, less than half of UK startups (44%) said they have a good understanding of the fundraising process. Just 1 in 7 described this as a very good knowledge. This is worrying. This lack of knowledge is impacting their ability to secure funding, leading to longer than expected fundraising periods, cash shortages, and smaller amounts raised than initially planned.
It’s a stark reminder that fundraising is not just about having a great idea; it’s also about understanding the intricacies of the financial world, from investor expectations to valuation and negotiation.
Profitability and sustainability key to winning over investors
In this new fundraising landscape, profitability and sustainability are crucial factors in winning over investors, trumping the big idea or soaring user numbers. For those who raised successfully, profitability was the top factor that led investors to back them (24%), followed by scalability (17.5%), the team (14%), and then revenues (8%).
Despite the challenges on raising funding, more than two thirds (68%) are optimistic about the next 12 months. And there are good grounds for this optimism. In a survey of our investors a majority revealed they were looking to back more startups this year.
Supporting Founder mental health
The survey also highlights something that isn’t talked about enough, the mental toll that the startup journey can take. 57% revealed it had impacted their mental wellbeing. 1 in 4 (25%) said it had greatly impacted this.
For many entrepreneurs, the stress of launching and running a business, coupled with the uncertainty of securing funding, can have a significant impact on their mental health. This is a critical issue that needs to be addressed, as it can affect a startup’s ability to succeed. Luckily our network is full of good advice and mutual support.
The pressure to grow rapidly, coupled with the fear of failure, can be overwhelming for many entrepreneurs. It’s essential for startups to prioritize mental health and seek support when needed.
Going for walks was the best way startups supported their mental health, according to 60% of respondents, followed by discussing challenges with family and friends and mindfulness/meditation. The message is clear, share your worries and challenges with others.
Cash shortages blight young companies
One of the most concerning findings of the survey is the number of startups that are running out of cash sooner than expected. 38% said the funds ran out sooner than expected, more than double the number who said they lasted longer (17%). However 45% said the fundraising period was about the same as expected.
This is a common problem in the startup world, and it can be a major setback for a young company. It’s essential for startups to carefully manage their finances and have a contingency plan in place to avoid running out of money. This might involve seeking additional funding sources, cutting costs, or pivoting the business model.
For startups that had previously raised investment, 54% revealed it had taken longer than expected, versus just 17% who said it was quicker than expected. In response to the present climate, nearly half have needed to raise smaller amounts than planned. Preparing for a longer haul than planned is crucial.
Government key role in supporting startups
The government also has a crucial role to play in supporting startups and there will be real nerves with the reported threat of the new Government cutting Business Asset Disposal Relief (AKA Entrepreneurs’ Relief) in the upcoming Autumn Budget . Top of the list for what the new Government could do was easier access to grant funding according to 80% of startups, ensuring more consistent long term policies (43%) and lowering corporation tax (42%).
These measures can help to create a more favorable environment for startups to grow and thrive.
Over the next few weeks we will be looking at the results from some of our other major territories. On the back of this research, AIN will be launching a new campaign for startups to be ‘investment ready’ when seeking finance with a new content series aimed at demystifying the fundraising process, based on two decades of experience supporting startups.
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