Two fifths of people who have started their own business are the children of entrepreneurs, as most founders dip into their own or parents’ savings to fund a start-up, new research has shown.
People with entrepreneurial parents could be more likely to inherit the skills needed to launch a business, according to a survey of more than 1,200 firms conducted by the 2023 UK StartUp Awards and Starling Bank.
More female than male founders have been inspired by a parent that started their own firm, with 42% of women saying so compared with 36% of men.
UK business is, at least in part, a family institution— Andrew Meigh, Charles Stanley
Children of business owners are more likely to be exposed to business ideas, challenges and opportunities from an early age, the analysis suggested.
But most people who launch start-ups have dipped into their own cash reserves to do so.
Some 85% of start-ups launched in the last three years have relied on the founder’s personal capital as an initial source of funding.
While a fifth of the respondents, all of whom entered last year’s StartUp Awards, said family and friends provided an important cash boost.
A separate survey of about 500 UK founders undertaken by wealth manager Charles Stanley yielded similar results, finding that a fifth used inherited money to kickstart their business.
Some 19% of start-ups were funded by parents, 10% by grandparents or other relatives, and 14% drew on a family trust for initial funding, the research found.
Andrew Meigh, managing director of financial planning for Charles Stanley, said the study shows that “UK business is, at least in part, a family institution”.
Meanwhile, Starling Bank’s study found that just 13% of business owners took out a bank loan to launch their start-up.
It comes as more than three fifths said they thought accessing finance was going to be their biggest challenge over the next 12 months, indicating that many entrepreneurs need more funding to grow.
Professor Dylan Jones-Evans, founder of the UK StartUp Awards, said banks and investors can often consider start-ups as “high risk ventures with a lack of any proven track record or market presence”.
Start-ups have faced a particularly tough environment in the last few years, first with the pandemic and now with higher interest rates and the uncertainties of the cost of living crisis— Harriet Rees, Starling Bank
But he added that smaller businesses make an “enormous contribution to the UK economy” and need support amid a tougher economic climate.
Harriet Rees, the chief information officer at Starling Bank, said: “Start-ups have faced a particularly tough environment in the last few years, first with the pandemic and now with higher interest rates and the uncertainties of the cost of living crisis.
“Many have demonstrated incredible resilience.”
