Acquiring investment: Why being different is better
Find out how three businesses have changed their business models in order to obtain investment in the UK’s highly competitive markets...
In response to the government’s call for an ‘enterprise led’ recovery following the 2008 economic recession, entrepreneurship has flourished in the UK – in particular over the past five years.
During this period, British business has experienced an entrepreneurial explosion as a result of the large number of start-ups seeking to make an impact.
With London having recently been crowned the tech start-up capital of Europe, as well as being the continent’s most successful start-up ecosystem, it should come as little surprise that prospective entrepreneurs consider the UK to be an attractive destination to set up shop.
Having said this, one of the most frequent questions asked by entrepreneurs is, ‘should I obtain investment for my business?’ This is the question which is pertinent to corporate Britain as, in most cases, investment is essential to scale a business, to challenge the competition, and to disrupt a market.
This is not only a common query but is also a major obstacle to many aspiring entrepreneurs and start-ups when they first set out. This problem exists for two reasons, with one being more significant than the other. Firstly, bank finance has been harder to come by for small businesses without a strong trading history or established income stream owing to the lingering effects of the financial crisis. However, this has been somewhat counteracted by the emergence of other sources of funding including peer-to-peer lending and crowdfunding.
The bigger, second issue remains in how start-ups can attract this investment, as it is becoming increasingly difficult given the high level of competition and saturation in the majority of British markets. With an estimated 600,000 start-ups expected to be created in the UK over the course of 2015, the desire to have a big impact within a market seems largely unattainable without first receiving a substantial amount of capital. The World Economic Forum’s 2014-15 report on global competitiveness revealed that the UK’s markets are the ninth most competitive in the world.
As a result, companies face a rapidly changing environment and must be prepared to adjust their strategy while at the same time staying competitive.
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Market disruption: Currency Cloud
In an environment where globalisation continues to dominate, even small- and medium-sized businesses tend to go abroad much faster. On top of cultural barriers, expensive market research and legislative issues, there is also the subject of international money transfers that in most cases are quite costly.
When asked, the CEO of Currency Cloud, Mike Laven, admits that low fees are proposed only to big firms, whereas other enterprises have to deal with what he describes as outrageous prices every time they want to finalise overseas transactions. Having observed this during his time in Silicon Valley, Laven’s start-up aims to disrupt the market with an innovative product-payment engine that is secure, convenient and affordable.
Instead of charging separate fees for every transaction, a monthly payment has been introduced that allows customers to manage their cashflow. Laven underlines the importance of transparency of transactions and time efficiency. This concept would appear to have hit the mark, as it it has received $10m in Series B funding and $5m in payments in its first two years of existence.
Current global coffee consumption stands at 141.6 million bags of beans a year. This creates plenty of waste during the production process which in return has become the fuel that drives convenience-focused start-up Bio-Bean. Arthur Kay, CEO of Bio-Bean, realises the importance of utilisation and shares a concept of ‘one man’s trash is another man’s treasure’. He re-uses discarded coffee grounds and transforms them into biodiesel and biomass pellets.
Similarly to Currency Cloud, this idea was devised and developed during the entrepreneur’s experience of working on another project. Kay realised that there was potential in buildings powered by their own waste and an opportunity to do so using coffee beans. The company is currently based in London and focuses mainly on the UK market, but Kay hopes that it can expand in the future upon having the necessary funds. The idea has already revolutionised the energy market and has led to an award of €500,000 from the Green Challenge. The idea seems to be particularly alluring to those investors that are environmentally-conscious. On top of this, Bio-Bean has been funded by such companies as Shell Oil, TATA and GLA.
Customer-focused: TravelBird UK
The process of organising holidays has shifted from self to ready-made packaged trips. Unfortunately, this can often lead to the lack of a personal touch and it is in this area that TravelBird is seeking to gain a footing. Sylke Riester, country manager for the UK, repeats the company’s motto that the customer is king.
She underlines the importance of putting together holiday deals that TravelBird employees would want to go on themselves and sees this as being the core advantage over other industry competitors. She believes that simplified methods of booking will allow customers to ease the trouble and stress that is often associated with bookings, endless telephone conversations and constant uncertainty. The goal is to bring the joy back to travel and to make people truly experience their holiday.
This concept has proven to be very successful as TravelBird has received huge investment which amounts to $40.89m; the majority of its Series A and B funding invested by Rocket Internet.
Putting a company into a certain business niche allows them to not only structure their strategy but to also send a clear message to the investors looking for firms devoted to their market. Whether it be market disruption – one of the bravest and most innovative ways to approach the market, a focus on convenience and therefore addressing the needs of an increasingly eco-friendly society, or customer focus helping to take a business to the next level, one thing has remained the same: copycatting and following the crowd has become passé and the power ultimately lies in standing out.