Types of Funding for New Drinks Brands

There have never been more types of funding available to ambitious entrepreneurs developing new flavours and experiences for the drinks market. The diversity of options reflects differing circumstances and expectations, of both founders and funders.

The three main choices are:

• Take on debt (such as a bank loan).
• Share ownership with a funder (some form of equity funding).
• Fund through profits (bootstrapping).
  
  

Each option has implications for speed, scale and the future management of the business.

As an entrepreneur seeking finance, it’s important to be aware of your own or your team’s aspirations for the business and the brand. As you read this guide to the types of funding available, consider what might be your best route to your desired outcome.

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Bootstrapping or self-funding

Raise funds by selling products and re-investing the profit. There's no external funding – most or all of the money comes from business operations, although to get it started, you’ll probably requires some or all of your own savings.

Reasons for:

• You retain full ownership of the business.
• Avoids the time-consuming process of attracting potential investors.
  
  

Reasons against:

• Significant capital investment is difficult, if not impossible.
• Growth is slow, restricted to what profits can fund.
  
  

Crowdfunding

Many businesses have raised funds through smaller contributions from individual investors, via an online platform. This is also known as crowdfunding, you have the chance to sShare your business idea and offer investors incentives and updates.

Reasons for:

• Good for marketing alongside the investment.
• Investors can support you with very small amounts.
  
  

Reasons against:

• Attracting investment can be difficult without a proven track record.
• You may not raise the capital you need.
  
  

Venture capital

This is usually equity financing, delivered through a series of funding rounds as the business grows. Venture capitalists look for firms with a product already gaining a foothold in the market, where a serious injection of capital could spark fast growth.

Reasons for:

• Venture capital funds often come with strong operational support.
• Supports rapid growth in the right markets.
  
  

Reasons against:

• Venture capital investors can be embedded for the long-term.
• Funders have significant control over the direction of the business.
  
  

Angel investors

Business angels are typically high-net-worth individuals who bring commercial experience alongside their funding. Expectations vary from one angel investor to another and it's important to be clear about these up front.

Reasons for:

• Angel investors can make decisions fast, as it's their own money
• There's more of a personal relationship between the investor and the founding team.
  
  

Reasons against:

• You risk giving up some control and ownership.
• The quality of support depends on the individual angel.
  
  

Friends and family

Taking investment from people you know is often harder than it looks. Not many have access to significant sums and even fewer have experience as private investors.

Reasons for:

• Possibility of funding at very low or zero interest rates.
• Family members or friends are less likely to require a business plan.
  
  

Reasons against:

• Few will have the capital or appetite for the risk.
• Personal relationships can be jeopardised.
• Unrealistic expectations of an inexperienced funder.
  
  

Accelerator

An accelerator provides an incubator environment, supporting company founders with funding, subject matter expertise and a roadmap for unlocking more substantial finance. They look for products ready to be commercialised, helping build a strong foundation for scaling the brand.

Reasons for:

• Tailored support for the company founders.
• Provides a safe space for developing ideas.
• Helps create a business plan that can pave the way to additional funding.
  
  

Reasons against:

• Typically leads to giving an equity stake in the business.
• Can require a significant time commitment by the founders.
  
  

No types of funding come with a guarantee of success

Securing financial support for your business idea is not the final barrier to success. Instead, it confirms that investors have the confidence in both your business (and in you) to provide funding, allowing you to progress to the next level.

The success of your idea comes down to a blend of your expertise and choices, the state of the market and the product itself - and to your own definition of success.

If your business is exploring various types of funding, to help secure its place in the market, you're probably at a crucial phase. Financial resources will help you grow, as will other input, such as commercial experience and market-specific knowledge.

If you're an entrepreneur championing an innovative new drinks brand, our accelerator can help.

In the last two years we've:

• Backed start-up drinks brands from around the world.
• Provided +£4 million investment into those brands.
• Helped founders test, learn and scale drinks brands of the future.
  
  

We champion and believe in founders - particularly from underrepresented communities - and the exciting new flavours and drinking experiences their brands offer to an evolving industry.

Learn more about our funding and mentorship program for drinks entrepreneurs.

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