By Simon Dixon, Co-Founder, www.banktothefuture.com

When raising finance a lot of people waste time sending business plans to Venture Capitalists, begging bank managers for loans, and pitching their ideas to any angel investor that they can find.

If you are scattered in your finance raising strategy, you will experience a lot of rejection, frustration and most importantly...waste your valuable time.

It is tragic, but many people never get their product and
business launched, because they waste time speaking and
pitching for the wrong source of finance.

If only they knew that there are willing investors for different types of businesses and projects, but they all hang out in different places. Beware of making the same mistake!

If you wanted to raise finance for your business or project in the past, you either had rich friends and family members, had a great network of high net worth individuals, had a high growth business getting you referrals to venture
capitalists (VC’s), were launching in a bubble and could raise finance on a stock market for just an idea or managed to persuade a bank manager that knows nothing about business, that you have a good business! Well the landscape has changed a lot.

Traditionally businesses would use friends, family and savings to get started. The cliche phrase used for this was the ‘Friend, family and fools’ round (FFF). If they made progress, they could attract more money through wealthy business angels.


Angels have traditionally been wealthy individuals that can afford to lose the money if they invest in you.

They should understand that investing in early stage business, projects and start-ups is very risky. To manage their risk they would need to make an average of ten investments for one of them to work well. An average investment in a business like this is around £100k if they want any chance of the business going somewhere, meaning they need a minimum of £1m spare cash to invest in risky
investments like early stage businesses and projects.

A conservative angel should have a maximum of ten percent of their entire portfolio in risky investments, meaning a sophisticated angel investor will need to have £10m of investable cash in order to mange a balanced portfolio and
invest in you.

After the angel round, banks used to engage in matched funding (Where they lend you a similar amount of money as other invest) when you put your own money in or raised Angel finance. Give them your house as security and you used to be able to borrow the money from the bank.

If you then took this money from family, angels and banks and made progress, you had the opportunity to grow fast by accessing larger pools of money from VC’s.


In the UK, VC’s really only invest in businesses that have already completed an angel round, are in a fast growing market, with a good experienced team, and the potential to be a £100m turnover business in three to five years. So if you don’t tick all of those boxes, you are wasting your time with VC’s.

If you reach this stage, you have many pools of money available to you from banks, capital markets and private equity houses. But now everything has changed in two big
ways...there is good news and bad news. The good news - new sources of money have opened up for you. The bad news - old sources of finance have closed. So lets get the bad news out of the way.


As a business, entrepreneur or somebody looking to raise finance for your project, banks do not want to play with you anymore. Full Stop. Simply put, banks have choices when they make a loan. They can lend money to somebody that has a nice secure job and gets paid every month from a large company, they can lend it to somebody taking out a mortgage and if everything goes wrong they get the house, or they can lend it to your business which has limited liability if it all goes wrong. If you are involved in a project with unpredictable cash flows, what will make a bank pick you? Exactly. So banks are out of the market, in fact, in the future, I don’t think they will want to play with small businesses or project finance at all.

Leave the banks to credit cards and mortgages, they don’t want to help you.

Today, in the UK, there is no real VC market. They don’t want to invest in new ‘ventures’, they only want to invest once you have proven you can grow big, so not much point looking at VC’s until you have proven that your business is
strapped to a rocket in a high growth market.

So where does that leave you? Well now for the good news.
VC’s do want to play, if you can prove your growth. And luckily for you, there are new sources of money in town to help you get there.

As a business or project seeking finance, there are three new sources of finance for you depending on your situation.

1. Rewards based CrowdFunding -
BankToTheFuture (BF) CrowdFunds

Here is how it works...

You upload a pitch to a CrowdFunding website on how you are going to create your product / project, and you offer non-monetary rewards to the crowd. For example, you can offer a copy of the product once it is complete to those who contribute £10, a VIP party to those who contribute £100 etc. etc.

You then promote this to the crowd until your funding goal is met on a set deadline. If your funding goal is met, you get the money and have to deliver upon your promises, if not, you get nothing and the money is returned. We call this type of finance a BankToTheFuture (BF) CrowdFund. It is most appropriate for those seeking money for a specific product or those at the idea stage and very early start up. The money does not need to be repaid and it does not cost you any equity!

2. Peer to peer lending - BankToTheFuture (BF)

The platform manages all repayments once you receive the money. Because there is no bank to pay, both parties get a better rate on their money. We call these BankToTheFuture (BF) CrowdLoans. This type of finance is most appropriate for businesses with good cash-flow, a good credit rating and trading history.

3. Equity CrowdFunding - BankToTheFuture
(BF) CrowdInvestments

Just like a public company offers shares to the public, a CrowdInvestment allows you to offer shares in your private company to the crowd online, for a desired level of equity at the valuation you set. Instead of rewards, the crowd become shareholders or both. if you successfully meet your funding goal, the platform helps you manage investor relations once completed. Investors invest in high risk for the opportunity of dividends and exit, just like an Angel or a VC.

The big difference is that it brings in a new source of money, as it is not restricted to just high net worth angels, it opens up investment opportunities for ordinary people and fans, supplier, customers, joint venture partners of your business. We call these BankToTheFuture (BF) CrowdInvestments.

This is most appropriate for investment ready businesses that can pitch a good business case for investors.

And You?

Starting from scratch, you can raise finance for your idea without giving away equity or having to repay the loan through a CrowdFund. If you deliver upon your promise and make progress, you can raise finance through a CrowdInvestment by offering shares to your crowd. As the business progresses you can apply for a CrowdLoan, allowing you to get yourself ready for a VC’s if you want to scale the business as you are experiencing high growth. This then opens up more traditional private equity, banks and capital markets as you grow.

So in summary, we are moving towards a new model of finance.

Banks will serve personal debt and mortgages. CrowdFunds and CrowdInvestments will serve early stage projects and businesses. Angels will start managing their early stage
investments through CrowdInvesting platforms, as the CrowdInvestment market gets more sophisticated. CrowdLoans will serve businesses seeking loans for working capital, development and growth. VC’s will serve businesses that need to scale fast in a growing market. Banks, capital markets and private equity houses will still be used for large companies.

So there you have it. Don’t waste your time with the wrong source of finance. Spend your time getting investment ready for the right source of finance, that is right for you. Getting investment ready for a CrowdFund, CrowdLoan, CrowdInvestment, Angel or a VC, are all very different forms of pitching and preparation, if you want to be successful.

Simon is speaking at our forthcoming Raising Finance Event @ Google Campus about CrowdFunding and how it fits in with traditional funding.

Special offer for Fresh Business Thinking readers until 21st October:save £200!

Book now for £95 by using the code 'EarlyBird' at the checkout