Digital Business - Essay Example

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The access of early stage finances by innovative start-up companies has the potential of fostering high-growth innovative and responsive entrepreneurship in 21st century competitive economy. …
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The access of early stage finances by innovative start-up companies has the potential of fostering high-growth innovative and responsive entrepreneurship in 21st century competitive economy. Start-ups often fail to qualify for the traditional loans from the banks due to lack of any substantial collateral and perceived high riskiness. Venture Capitalists (VCs) and Angel Investors play a clinical role in bridging the existing financing gap in high-growth start-ups. Business angels are becoming increasingly important to source of equity capital for at the seed and early set-up stages of a business a field many VCs often shy from.
Angel investors have the following advantages; they increase the supply of financial capital, contribute towards a business’ ability to attract more capital, increase the value of a company through value addition activities and strengths the entrepreneurial environment. Governments also contribute to improving the growth chances of start-ups via exogenous instruments. Such instruments include tax options such as Enterprise Investment Scheme (EIS) in the UK. For an investment to qualify for income relief under the scheme, it must meet some criteria. The business must not be registered in a stock market, it must be registered and have UK as the permanent resident. Also, its employees should be less than 250during the financing, it should be an independent entity, engage in trade as per EIS regulations and have a gross asset base of less than £15 million before financing and £16 million after the financing.
Spacehop is a UK London based online start-up company which launched its operations in October 2015 first targeting London metropolitan area but aiming to expand its services over other areas. It was founded in January 2015 by professional barristers Mathew Beatty and Luke Eastwood. The company consists currently consists of a team of five the two founders and three employees. Spacehop qualifies under the EIS scheme and therefore an angel investor investing in the company is eligible to make a claim for income tax relief. Spacehop’s slogan is Their Home. Your Office. The online based service provides homeowners with an innovative and efficient way to rent their residential properties to professionals, self-employed freelancers and small businesses during the day for working area purpose. The freelancers often seek favorable working spaces where they can access services such as good internet connects.
In 2011, there were approximately 1.56 freelance workers in the UK. Experts expect this number to grow at an annual rate of 3.5%. Also, in 2014 UK had 4.2 million home workers a figure that is expanding by 13.9%.The micro companies which represent 96% of the registered companies in the UK is growing rapidly. Oxford Economics also expects self employment to grow at a rate of 15% over the next ten years reaching 5million people by 2024. CBRE argues that there is a gap in the provision of convenient, accessible and flexible working space. Many of these workers and entrepreneurs cannot afford the high commercial office spaces whose prices in have increased sharply in the last five years. In addition, home owners who often have mortgages to pay need extra incomes.
The Spacehop is seeking to establish a responsive one stop platform whereby the office space seekers can homeowners can match their needs. People looking for space can choose from a wide variety of options in a seamless way. Despite the revolutionary nature of Spacehop’s model, the company faces stiff competition from the co-working space providers. Co-working is an office model whereby independent individuals share rented work spaces for use as their place of work for a flexible period of time. Co-working model has gained high popularity since people only pay for the space for only the time that they are using it. Also, the model often provides other services such as video conferencing, phone reception, conference meeting, and professional support services. Besides, many co-working offices are located in highly accessible areas and often have excellent internet connections.
Despite this completion, Spacehop can gain a considerable market share and remain competitive by focusing on the efficiency of their services and that of the working areas. Most of the Co-working spaces are located in high traffic areas with a lot of noises. In co-working offices, multiple people work in a common work space which results to interruptions. Spacehop hopes to capitalize on the need for quiet working environment that is individual based. Many people want to work from the proximity of their neighborhoods but not necessarily their homes. Also, people are seeking an easy way to find a home based office a task previously undertaken through social media. People searching for social media have to do a vigorous research a factor that Spacehop eliminates by providing multiple option one stop platform.
By investing immediately, an angel investor will provide finances that will help the company scale its services rapidly reaching a broad market. Besides, there is no direct competitor to the Spacehop model. The firm gets its revenue from charging service charges through a model utilized by companies such as Airbnb. The company will have a charge rate of £10-20 per day. These charges are affordable to self-employed and small companies. Innovative, hardworking and ambitious founders lead the company. The pair has carried out an extensive market research on the rental home office segment. So far, the company has acquired 50 homeowners and several office renters in London area customer. This is a substantial number considering that the company only the short period the company has existed. The leadership has secured interviews with news agencies such as the Irish News which has helped market the company.
The operations of Spacehop face several risks. First, the company faces the threat of conflict in liability responsibility. There is a question of who should cater for the damages arising from the use rented property. The homeowner and renter’s insurance company are unlikely to provide liability coverage for commercial home uses such as the office renting. Such a circumstance may result to conflicts or litigations which may damage Spacehops reputation and customer’s willingness to participate in the business model. Second, the company faces the threat of balancing the varying legal requirements that are not consistent in different areas. Lastly the online platform faces the risks of security and scaling.
The business can wade off the challenges by hiring a legal adviser who will give the firm an advice on the different legal aspects of the business. Through, strong ad campaigns, the company can foster responsibility in the use of the rented property by its customers. Read More
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