Setting up a business in a recessionCategory: Starting Up Posted on 16-01-2013
Mark Timbrell, CEO and Founder, PKTMNY:
We are currently experiencing one of the worst economic downturns in history. Traditional sources of funding just aren’t lending and this issue is compounded by the delay in support provided by Government. In my mind, it has never been more challenging to start-up a business in the UK.
Yet, in the last months, I have done just that and launched PKTMNY, an online environment that parents set up for their children to learn about saving, and spending, fully controlled by parents at all times. It has been nearly two years in development, but the success we’ve achieved so far is testament to the power of a good idea, great team and our gaining support from private investors across the length and breadth of the country.
The funding dilemma
Of course, I was worried about setting up at the height of a recession. In this climate, the traditional financial providers were simply not lending. We also found that the venture capitalists were not as open to sharing the risk as much as they might have been in the past. Therefore we decided to focus on a privately funded strategy and identified individuals who shared the vision of what PKTMNY could achieve in terms of transforming how families interact and learn about money. Our approach delivered a significant response.
Once we had identified the individuals, there were two factors that made a critical difference. Firstly, we had a very unique proposition, it solved a real problem, and we had identified a large, virtually untapped market opportunity and had insights to back it up. These insights supported our belief and provided credibility that PKTMNY was a genuinely new proposition that presented a significant business opportunity.
The second key factor that helped our success was committing to meeting potential investors face to face. In eight months, this saw me cover over 30,000 miles to make detailed presentations around the UK to achieve the investment that the business needed. A heavy personal commitment but one that reaped significant reward by helping me secure investors who might otherwise have dismissed our presentation.
The biggest challenge with securing funding has always been that we were trying to demonstrate success before we had started trading and proved the audience existed. Looking back, we were helped significantly at early stage by securing a private investor who not only came in with significant financial support but also business support. He saw the opportunity of the product, was as passionate as we were about improving financial awareness amongst children and was prepared to roll up his sleeves to help us with direct introductions and guidance. It proved what I have always known, that successful business rests on the strength of people around you. The personal support our investors gave us during these tough times was fundamental to our success.
The impact of the recession
While the recession only created challenges when it came to securing funding, it did have some positive impact on our business. We found it heightened interest in the ambition of PKTMNY because our proposition is about fundamentally transforming how children learn about money, embedding sound financial behaviour from an early age. Understanding the value of money has never been more important and the need to save it before it is spent.
Establishing a business in a recession also makes you more aware at every level about how to make your business efficient. This meant that our model is to have a core team, supported by contractors who are selected on the basis of being best in class but also most cost effective for every service we need. The economic uncertainty has meant that in many cases we have been able to negotiate on terms and benefit from deals that just would not have been available to a start-up before the recession.
What would have helped?
Even at the best of times, setting up a business presents challenges and significant risk. My biggest gripe, having gone through the process, is the lack of Government support for entrepreneurs. I was disappointed that the Chancellor’s autumn statement did not include more measures to help smaller businesses to prosper. For me, the limitations business owners’ face, especially around securing funding, is a massive brake on an area of industry that could drive real economic growth and support the UK’s recovery. More has to be done to support innovation and entrepreneurship in this country.
A happy ending
Having come up with the idea for my business, I know its successful launch rested on my meeting kindred spirits who believed in the proposition as much as I did, and committed to working closely with me to launch it. It’s a good team that creates a sustained business, not an individual.
Two years down the line, we finally launched PKTMNY this autumn and are delighted by the success so far. We’ve secured great buzz online, been featured on national broadcast, print and online and are proud of the number of our users who love using it. I know we are just at the start of the journey but it is one that would not have been possible without the personal support of my team and the investors who supported us. If you want to find out more, check out PKTMNY or get in touch via our twitter or Facebook.