Attracting further investment to a prize field
On the idea that challenge prizes leverage greater additional funding – as participants are able to attract more external funding than otherwise would have happened due to the raised profile, wider platform and visibility to key stakeholders that a prize provides, we are beginning to gather insights to support this claim. Figures taken from Crunchbase – an open-source database of entrepreneurial activity – was used to look at how much investment individual teams raised in the Open Up Challenge before they participated and after they’d been registered onto the prize. The Open Up Challenge was a £5m prize fund backed by the CMA to inspire solutions that use new open banking technology to transform the way small businesses discover, access and use financial services. Fourteen participants that took part in stage 1 of the challenge had received a combined total of £102.7m investment prior to the prize commencing, whilst they collectively went on to secure £638.1m subsequent to taking part in Open Up. Data on stage 2 of the Open Up Challenge shows the investment received for ten participants in the pre-prize phase totalled £320.7m, and the total post-prize amounted to £288.6m. Finally, data taken from the Open Up 2020 Challenge, which finished recently in October 2020, also saw an increase in the external funding received by fourteen participating teams.
The chart below shows the aggregate investment in teams on the Open Up and Open Up 2020 Challenges, and highlights the positive link with challenge prize participation. Teams that received investment across the three challenges include Funding Circle, Funding Options, Fluidly, Mojo Mortgages and Moneybox.
To illustrate how this leveraging works in practice, Upside Energy – now KrakenFlex – was one of the entrants to the Challenge Works Dynamic Demand Challenge with the idea of harnessing the energy in back-up power supplies, such as batteries in data centres, traffic lights and electric car charging points, to create a virtual energy store that could be drawn on when needed. It received £10,000 to develop a business plan and prototype and started formally trading 18 months later, in April 2015. By the end of 2018, Upside had raised more than £3 million in grant funding and £6.7 million in equity finance.
Mojo Mortgages, who combine credit scoring and open banking data to help determine a client’s mortgage readiness and offer personalised mortgage recommendations, were one of the winners of the Open Up 2020 Challenge. Mojo Mortgages felt that the prestige of being a finalist, and then winner, led to a wave of positive and high-profile press coverage that helped their brand grow exponentially. They were able to make numerous industry connections that they thought would have been difficult to establish as a start-up, had they not taken part. Subsequently, RVU, the owners of Uswitch, Money.co.uk and Confused.com, agreed to buy Mojo Mortgages (subject to regulatory approval) with the aim of scaling the business to handle the mortgage enquiries from some of the 15 million users that visit its sites each month.