UK unicorns - how much did they raise in their seed rounds?9 September 2015
For service businesses where you can target customers from month 1 and even start making revenue, funding can be less important. But for ‘product’ businesses where-in you have to build for 2, 3, 6 months before you can start making revenue, raising capital and the resultant “cash-burn” are required. It’s no different than a big corporate launching a new project. At the same time, we’ve also seen several companies bootstrapping their way through, and I have a lot of respect for them. For me, I want to build several products and businesses, and so would rather raise capital (even though it means dilution) but build, scale and in an unfortunate scenario even fail fast.
Having run CityFALCON for the last 2 years, I’ve had several discussions with investors and entrepreneurs about fundraising in US and UK. In the US, most start-ups are run as proper businesses which means you have to have serious capital to get started. On the other hand, due to SEIS limit of £150K and maybe even Dragon’s Den, investors believe a product start-up should raise a very small amount and be valued even as low as £500K. So what entrepreneurs can raise at times is less than average annual salary of a tech person in the UK. I’m not saying that every idea is worth millions but ideas that are worth investing and where the right team is in place are definitely worth much more than you see today in the UK. In my article UK funding gap is killing start-ups and also creating a bubble, I’ve explained the impact of raising peanuts in the seed round. You can also see comparative start-up valuations by country and region in my another article The Mystery of UK Start-up Valuation
Let’s look at how much money did the UK “unicorns” raise in seed rounds i.e. pre-Series A. Unfortunately, not all companies have disclosed how much they have raised, and so below are only the companies where such information is available. If you have info for any other companies, ping me and I'll add it to this post.
|Seed Round (£)||Second Seed Round (£)||Crunchbase Profile|
|Funding Circle||£715k||Funding Circle|
Here are some other popular companies:
|Seed Round (£)||2nd Seed Round (£)||3rd Seed Round (£)||4th Seed Round (£)||Crunchbase Profile|
|Hassle.com (recently exited for Euro 30m+)||£15k||£260k||Hassle.com|
How did most of these successful companies manage to raise higher than average seed rounds in the UK? My hypothesis is that their founders may be from one of the categories mentioned in my article Abundance of start-up funding in the UK but not necessarily for YOU
If you want companies in the UK to generate the same level of returns generated by Silicon Valley companies, allow us, entrepreneurs, to be able to hire the best people and services, which comes at a cost, to make our businesses successful.
I’d like to hear what other entrepreneurs and investors think about it.