Settld: Finding Grant Funding for your Startup
Guest post by Julie Wilson, Settld
Finding Grant Funding
There are different ways of securing early startup cash, aside from personal bank loans or begging family and friends. One option is grant funding. Whilst there are caveats of relying upon this approach, the cash comes with no equity dilution and can offer a pre-revenue lifeline. Here is what we’ve learnt from going through the process so far.
Settld is an early stage startup which automates end of life admin. We were incorporated in the North East of England and have been running officially since May 2020. In 6 months Settld has won 2 grants, and further match funding, to the total of £280k. This has allowed us to attract and hire talent, generate early traction for the MVP, and install confidence amongst the team. It also means the pressure is taken off introductory conversations with potential seed investors, as we have a runway to lift the business before seeking additional cash.
What is grant funding?
Grant funding is money you can apply for through various schemes and competitions. It’s not a loan, you don’t need to pay the money back, there’s no equity to give away, and you won’t have to accommodate anyone new on your board. There are many forms of grant funding, all of which come with different requirements, so it’s worth being informed before you start.
Choosing the right grant
Much grant funding works on a match-basis (you pay 100%, and funders repay between 30% to 80% in arrears). However, there are also competitions that you can enter to ‘win’ money upfront. We used both. Competitions generally range from £10k – £5m in value. Each will have its own eligibility criteria, specific project scope, and will be broken down into sections for completion.
Places to look for grants (UK):
- Innovate UK. This is the biggest source of UK Grant Funding, offering numerous competitions. Most are themed around supporting business, eco-developments, agri-tech, and other innovation research areas. The grants are competitive – the highest scoring applications will be awarded the funding (see Tips for Winning below). Innovate UK funding size varies from £50k to £1M.
- Local Authorities. Most local authorities have established Business Development/Enterprise departments set up, to support new and growing businesses. The grant sizes and criteria on offer vary across regions, but it’s worth looking for what’s available in your area. In our part of the North East, “Business Durham” provided a range of funding schemes. We found that most local authority grants were smaller (from £10k – £50k) and match funded – you pay 100% upfront, and they repay up to 50% once the project is completed.
- Digital Drive. Any “Tech” developments are supported by these grants. Again, they tend to be localized, so your local authority might direct you to the right contacts. .
- Business Innovation Centers. These are also local to your area and are focused on firms who can evidence that their project is innovating products to market or products within a business.
- Universities have a requirement to work with SMEs and support digital innovation. Support varies from cash to part-funded interns. Asking to speak to someone who’s working with the Local Enterprise Partnership (LEP) should get your search on the right track.
It’s worth noticing that grants vary in size, timescale and required admin. Make sure you evaluate the opportunity-cost properly, otherwise you may end up spending days securing £4k, when your efforts would have been better focused elsewhere.
Tips for Winning
- Prepare. Most competitions provide an introductory webinar that you can attend or access a recording of. It’s really worth taking a couple of hours to read/view all the guidance materials. Take careful notes of what they’re looking for in the scope and eligibility criteria.
- Give yourself time. We discovered the first Innovate UK grant opportunity 10 days before it closed and had no idea of the work that it involved. That meant a mad rush right up to the wire, hearts thudding in our chests when we pressed the ‘send application’ button 60 seconds ahead of the deadline. With many warnings about system crashes in the last hour, we’d recommend avoiding this stress if you can.
- Understand the scoring system. Innovate UK projects have between 3 and 5 assessors for each project grant submission, and your grade is given an average of all scores. Smaller funds may be assessed by committee or one representative. Awards are normally made to the highest scoring projects, and that’s based on how well you answer all the questions – as well as the strength of your idea.
- Pitch properly. It might sound obvious, but we were told from individuals who previously assessed grant applications that people often don’t ensure their sections clearly link back to the scope and eligibility criteria.
- Use structure. Each of the main sections will have sub-questions. Use these for your guiding structure and make sure that you match your answer to the scope of the competition for each section. E.g. where they asked for routes to market, use a subheading of: “Routes to Market.”
- Ask for less and don’t round up your numbers. We were advised to ask for just under the maximum funding amount available, and to ensure that our numbers were precise. As an example, the first grant was open to £50,000 – we applied for £46,634.
- Subcontractors. Some competitions limit the value you can spend on outsourced activities. Check this carefully, as otherwise you may end up backed into a PAYE corner, which isn’t what most early stage startups want.
- Project Partners. Some grants will allow you to bring in ‘project partners’ (meaning they’ll submit a request under your main claim, and the grant will pay out to them separately). This can strengthen your application and increase the overall sum of cash all parties apply for.
- Cashflow. Most grants expect you to pay first and then allow you to reclaim the funding, either in 3-month trenches or at the conclusion of the project. That means you need the money to pay for the project upfront – they won’t help you with cash flow issues.
- Monitoring. Once you’ve won the cash, most grants are very prescriptive about monitoring, structures and processes (there’s little room for deviation from the plan you submitted). It’s also worth putting in a comprehensive risk assessment, Gantt chart, and project deliverables overview – this will strengthen your application and save you a lot of time later on.
Grant money can be a great way of getting through the startup bootstrapping stage – as long as you’re willing to put the time in to claiming the cash and doing the followup paperwork. Now is a good time to apply for grant funding, as the government is putting additional resources into stimulating research and development. Just make sure you check the small print and can manage the admin around it.
If you have any further questions, feel free to reach out to firstname.lastname@example.org, and we’d be happy to share any additional tips with you. Good Luck!