UK: Top Tips For Setting Up Your Startup

Last Updated: 9 March 2015
Article by Deloitte LLP

Have you thought about ditching the comfort of your nine to five and all the corporate entertainment, and taking a leap into the world of startups? Tech City is booming and it seems everyone wants a piece.

For the last five months I have been working for a startup called Collider, a Business to Brand Accelerator for Marketing and Advertising startups, and am beginning to understand the evolving startup ecosystem in the UK. I have been seconded to Collider, as part of a wider Deloitte Tech City initiative and the secondment scheme offers me the chance to work in an entrepreneurial environment as well as showcasing Deloitte's stance on nurturing talent and start-ups.

During my time at Collider I have seen the early-stage pitfalls, experienced the co-founder emotions, and witnessed countless investor pitches. For those of you thinking about taking the plunge I've come up with some top tips for getting on the road from MVP to IPO;

Don't go at it alone – the most successful startups have two or three co-founders and based on a TechCrunch report, 90% of co-founding teams comprise people who have years of history together, either from school or work. You may be interested to know that the average age of Unicorn (US companies with over a $1BN valuation) co-founders is 34. Co-founders are vital; you'll bring different skills to the mixing pot, you can share those highs and lows, and you're far more attractive to investors as a team.

Be funding 'smart' – assess all the funding options available to you. The UK funding market is maturing; we have angels, angel syndicates, government funds, VCs, and crowdfunding platforms. My advice to early-stage startups would be to mix angel investment with crowdfunding. Angels will give you that vital investor network, while crowdfunding will give you instant product stickiness. The power of crowdfunding can lead founders to over-value their businesses, with little or no market validation. Have a long-term funding plan in place when you embark on your seed round.

Embrace the legals – get to grips with the legal terminology concerning your startup, as it will come up time and time again. If you are giving away equity in your business, make sure you know what rights your investors are adopting, who has to approve certain business decisions, and who gets what preference on an exit. You don't want to be left high and dry.

Don't forget the inevitable, Tax – for early stage investments (whether from Angels or Friends & Family) Seed EIS relief can give your investors up to 50% tax relief on what they invest (which means they can put in twice as much); for larger investments, EIS provides up to 30% tax relief for investors and, if your company is undertaking development work, you may be able to recover up to 33% of your costs in cash through the R&D tax credit.

In the past five months I have participated in the early-stage growth of 10 technology startups and these are pitfalls that have arisen time and time again – hopefully you won't make the same mistakes.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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