Plugging the funding gap

Dan Rajkumar is a successful technology entrepreneur, founding his first business interest when he was still an undergraduate at Leeds University. He sees first-hand the frustration many business owners have when it comes to accessing finance.

A director at FinTech North, his latest venture is looking to do something about that. Called, the Leeds-based peer-to-peer lending platform focuses on finance for small and medium businesses

Daniel Rajkumar

Rajkumar said it was created to address the frustration many business owners feel when it comes to accessing finance as well as the frustration lenders have when it comes to “disappointing levels” of interest available from traditional investments and savings solutions.

It began accepting loan applications in September 2012 and funded its first deal the following January.

To date it has facilitated more than £15m in loans from more than 250 UK SMEs looking for finance. It is looking at completing another 40 by the end of the year.

Rajkumar said there is a funding gap when it comes to support for start-ups to get to the next level and describes the scale-up journey as “a hard one”.

He says the P2P sector is still growing “pretty strongly” and he added: “A lot of people are looking more seriously at crowdfunding as an alternative to the banks. People also tend to trust us a little bit more.

“It is all about lending to small businesses, helping people to really grow their organisation and find new innovations to help them develop the business.”

Lizzie Smith

Lizzie Smith is based in KPMG’s Leeds office. She works with high growth businesses in the region.

She also manages the practice’s relationship with NorthInvest , helping to link early stage tech businesses to finance.

Founded in 2016 and aligned with the Northern Powerhouse, NorthInvest is a not-for-profit angel investment organisation that helps tech and digital start-ups raise money.

She said: “They need to spend an awful lot of money up front in development. They need a lot of investment early on to get to the same stage as more traditional businesses. Up-front investment is needed to develop cutting edge technology.”

She believes there is a lack of awareness when it comes to angel investing in the North of England. “Angel investors are not standing up and shouting about what they are doing. That is why organisations like NorthInvest are really important, helping early stage businesses get access to funding.”

Smith added: “Finance is out there. Venture Capitalists have specific funds and are ready and waiting to invest in early stage businesses. They are all looking for the next big thing.

“A lot of businesses really struggle to present a compelling business case to these VCs. There is work to be done, particularly in the North, to make sure there is the support there to help these businesses become investment ready.

“Something we hear time and time again, is that entrepreneurs struggle to navigate and find out what support is there

“We are seeing VCs tending to invest in later stage businesses than they have done previously. They are looking to invest in scale up businesses that are generated revenue and they are looking for very novel ideas and concepts.”

David Harrison KPMG UK private sector technology consulting leader, added: “I speak to a lot of start-ups. They find it relatively easy, with funding from friends and family, to get to £1m turnover quite quickly. The challenge is how to kick on from that.”

James Fitzgibbon

James Fitzgibbon, partner at Squire Patton Boggs agrees that there is investment cash out there. He said: “There is money for people to access, depending on whether they are willing to sell some equity.

“Investors are looking businesses that are making money now. It is getting through those early years when you are operating at a loss that is the challenge.

“It is also about attracting the right sort of investor, who understands your position in the market, what the vision is. You also need to have a strong management team.

“The eco-system is really strong both in Manchester and Leeds, there is lots going on, and they are particularly strong in fintech.

“Software as a service is popular with investors, things that plug into payment processes and data management.”