Promising UK insurance sector technology startup Honcho has turned to raising its next round of capital through a crowdfunding platform, after European Union (EU) funds allocated to support its launch were put on indefinite hold due to Brexit.
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The company was preparing to launch with money coming from the European Investment Bank (EIB), but the funds are now on hold until the overall Brexit divorce bill is agreed.
This has left a £650,000 shortfall, which the company is now raising through crowdfunding platform CrowdCube, with Investors getting shares in the company.
After a week of crowdsourcing, the company has already raised more than £300,000 through the CrowdCube page.
Honcho offers a free mobile app that promises to take on the established price comparison websites for car insurance. Rather than the customer looking for the best deal, they put their details into the app and the insurance providers make bids to the customer.
Insurers pay £1 to bid and there are three rounds of bidding, with insurers able to see what prices competitors are offering.
Frank Speight, commercial director at Honcho, said the venture capitalist had agreed to fund the launch in the summer, but it was not able to go forward because it was “one of many” that was getting funds from the Joint European Resources for Micro to Medium Enterprises (Jeremie). This is part of the European Investment bank fund, which is shared by organisations across the UK.
“We were pretty much ready to go and were planning to launch the business in the first quarter of 2018,” said Speight. “We had to have a rethink. As one of the things we had considered in the past was crowdsourcing, we decided that might be a good route to go.”
Speight hopes the government will fill the gap left by these funds being held back, but said startups such as Honcho just can’t wait for the money.
“It is frustrating and I don’t underestimate the challenge the government have but, in the meantime, the world doesn’t stop and we have to be innovative,” he added.
The UK government needs to clarify its position to startups as startups cannot wait around for money or risk losing funding to tech hubs in other parts of the world.