5th October 2016

The Equity Economy: Disrupting the way startups start up

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The startup world is growing, yet 90% of startups fail. Ifty Nasir, CEO at Vestd, explains how the equity economy could change the way we do business and create opportunities for startups to make a real difference. 

In terms of stressful situations, research shows that entrepreneurs rank starting a business above divorce or the death of a spouse, despite these being widely considered the two most stressful life events. Startups are not for the fainthearted, and yet entrepreneurialism in the UK is at an all-time high.

Team meeting around a table

In 2015, 608,110 businesses were incorporated – a five per cent increase on the year before and a 20 per cent increase on five years ago. Pundits believe that despite a period of net job creation and earnings growth, more people than ever are deciding to strike out on their own. Location technology has taken the startup world by storm in recent years as more people see the innovative possibilities – Pokemon Go is one example of location-based success, but startups such as GeoSpock and StaySafe also put location at the heart of their businesses.

As the level of incorporation has increased so too has the number of incubators and accelerator programmes – Geovation being one of the options and the upcoming 10th Geovation Challenge an innovative way of encouraging startup creativity to solve real problems. Yet, despite these aids, only a small fraction of startups will see their third birthday.

Poor cash flow management is the primary reason for a vast proportion of business failures. The key, obviously, is to have enough cash coming in to meet your necessary expenditure on a month-by-month basis, but this is sometimes easier said than done.

Two guys having a business meeting in a cafe

This is where the equity economy comes in. Simply, the equity economy is a way for entrepreneurs to turn a small percentage of the equity in their startup into an easy-to-use currency that can be used to reward those that help them to build the business. In other words equity in exchange for expertise from people with the skills and experience new businesses need such as branding, marketing, web design, accountancy, consultancy, mentorship and much more.

These contributors are the specialists that many organisations need but can’t afford due to their limited cash flow.  At the same time there are many specialists out there looking for an opportunity to “invest” some of their spare time in exciting new ventures in exchange for real shares in that business.

One of the startups that is growing successfully using Vestd is Go Jauntly, who have recently been offered a place on the Geovation Programme.

With so many businesses at risk of failure for the wrong reasons, and another half a million or so being created each year, the entrepreneurial ecosystem needs the equity economy. Resultantly the equity economy is set to alter the startup landscape irrevocably and contribute towards the UK continuing to be an entrepreneurial powerhouse.

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