As Investors Cut Back, What Innovation Funding Options Are Available?

Over the past couple of years we’ve seen the equity pool shrink, and Venture Capital (VC) funding steadily decline. Dilutive funding sources are becoming less frequent for SMEs and so for businesses within innovative/R&D based fields may be more likely to seek other options, such as non-dilutive funding sources.

Why is the VC Market Declining?

Globally venture capital flows have shrunk since the highs seen in 2022, which is also reflected within the UK’s VC market. This is partially due to a higher cost of borrowing and a drop in investors interest in risky investments. Whilst there’s been some sign of recovery towards the back end of 2023, we are still far from the peaks of 2022.

What can Innovative Business’ do to Raise Funding?

If you’re set on seeking VC funding, or other sources of dilutive funding, try to establish a strong financial portfolio to reassure investors that your business is a relatively safe investment. Alternatively, it may be worth seeking source of non-dilutive funding, especially for innovative SMEs that can apply to the likes of R&D tax credits or innovation grants.

How to Find Out if You Qualify for UK R&D/ Innovation grants

There are different requirements for different grants so it’s always worth checking them specifically, but as a blanket statement as long as your business has intentions to work in the UK, is registered in the UK, and aims to bring a new product to a market for a beneficial reason then you are likely to qualify.

Whilst almost any industry can be applicable, here are some generic examples:

• Biotech
• Energy
• Software
• Construction

Venture Debt as a source of Non-Dilutive Funding

Venture debt is a great loan option for fast growing businesses that want funding to support them. Due to it being non-dilutive, the existing shareholders of the business will not lose equity and retain control of their business. Venture debt really stands out as a great option for start-ups or those seeking innovation funding, due to the fact it isn’t asset or equity based and focuses on the borrower’s ability to raise capital for repayment instead.

A Venture Debt Alternative for Innovative SMEs

If you’re eligible for, or have recently acquired, R&D Tax Credits, we have the perfect source of non-dilutive funding for you. Our SPRK Innovation Term Loan bridges the gap between R&D lending and venture debt, providing an advance loan of up to 150% of your latest R&D claim. If you’d like to learn more contact us and our financial experts can help set you up with the next steps to accelerate your innovation fund.