News

Your business and other people’s cash

Jonathan Gold

08 Jun 2015

I have said before 'investing is a balance of risk and reward' - so is running your own business. Most entrepreneurs do both by taking a big risk with their own cash and investing it into a conviction in their abilities to reap a reward.

Some then go on to seek other people's cash to support their vision and belief that they can make a return. I first did this when I was 26. Not with mounds of my own money as I didn't have lots but it was a start-up business with a friend; we also raised money from others.

The business grew to a turnover of just under £1m with around six staff. That was London, in 1986; we lasted three years before learning the best lesson in business, the wrong way!  'Don't run out of cash', or put another way we were profitable but couldn't meet our short term debts; result, the liquidator.

Most surveys show around 90% of start-ups fail, others say the number is 40%. Whatever survey or professional investor you listen to the fact remains it's a risky investment but one that can also reap very high returns; sometimes.

I know what it's like to fail but it didn't put me off the idea of tackling a start-up again, and eventually led me to form Finance Tree as a management buyout and then Rivers Capital Partners in 2009. The experience of starting and raising cash in the mid-1980s was more painful than it is now. Today, there are more sources of capital than ever, more mentors, more incubator and accelerator programmes and more tax breaks for investors. There really is no excuse if you want to start a business or if you think you could grow your own.

At Rivers Capital we still see around 200 businesses a year and now also have a loan book with over £5m invested in 400 regional entrepreneurs with an additional 61 with around £14m of equity investment.

The equity side has a range of business angels involved with our Fund. The best entrepreneurs understand that investors are important customers. Others don't see investors as important.  Major mistake; I think it's because they see it as just another commodity like the electricity they use. Perhaps it's a little too easy?

For some reason businesses research their products and markets, even customers but don't research the available investment and the investors. We are all different, want different things and are different to work with. I'm not a life-long investor; as I have explained, I have built my own businesses while others have been professional investors all their careers.

And don't tell me the banks aren't lending, the best of them are and the alternative finance sector is growing even if it's still small. A recent NESTA report stated that £84m was raised by equity crowdfunding platforms in the UK last year, small but growing.

Peer-to-Peer lending is more significant; Funding Circle is the leading supplier in the UK with £100m lent to businesses in the first three months of this year.

The North East has had £142m available through the funds from North East Finance via managers like me and the team at Rivers Capital. Oh, and we also have our very own on-line finance platform in the region, GrowthFunders who are also a growing business and offer something different; go and take a look.

So what's my point? Well, I want to encourage you to seek investment but more importantly to start and grow your business. Don't be afraid to fail; I have done and know what it's like to start and fail and start again. Investors are used to failure (or they should be...) but treat the investors cash like your own and talk to people like me.

Running you own business is the best thing in the world - worries and all. Oh, and the North East is a great place to get the support and cash you need.


Your business and other people’s cash

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