Start-ups secure funding as recovery kicks in­

For those of us on the ground building businesses, a new reality is emerging as the recovery sets in. Ariadne has won funding for five companies in 2010 including Everyclick, which has secured a hefty sum from new and existing investors. Why are so many start-ups getting funded – in our portfolio and elsewhere – in the UK? Because the smart money knows that in the last stages of a market downturn, the forces of growth are at work and the full bloom won’t become obvious until much later.

One indicator of the rise of the next wave has always been the technology sector. When Microsoft and IBM start reporting sales growth, everyone knows the recovery is back. This time though we should look for derivative IT firms which are pioneering “software as a service” plays not the old heavy IT licensing firms. Aim-listed Nasstar, which provides a hosted desktop product enabling firms to keep IT costs extremely low, has just announced results, and reported a 10 per cent uptick in revenues, and record earnings.

So what is the new reality for firms in the post financial crisis, new era of responsibility? Here’s a few ideas:

1. Your business model must be inclusive, i.e. work for everyone in the ecosystem. Why is EMI struggling while early stage companies in the music industry like SliceThePie and Spotify are transforming the sector? It’s because their business models align all the stakeholders in the transaction.

2. Keep fixed costs low. There is no benefit and only headache to have in working at the local hard drive level instead of the cloud – as per Nasstar’s hosted desktop solutions. Out are the fully loaded costs of mega IT departments. In are plug-and-play environments like Nasstar which work equally for one man shops as well as global consulting firms.

3. Corporate Social Responsibility is no longer a niche activity. In a world where most of us have felt duped by the government, bankers or corporates over the past couple of years, people are hungry to know what you stand for as a business. All great companies have a cause which is why Apple flies high. If you can through your brand – whether that’s Vodafone or Bing or Tesco – enable any consumer of your products to “give as you live” and consume, then you create a loyalty which is not transactional but embedded in values.

Julie Meyer is founder and chief executive of Ariadne Capital, runs Entrepreneur Country and appears on the BBC’s Online Dragon’s Den. Everyclick and SliceThePie are portfolio companies of Ariadne. Nasstar is a Partner to Entrepreneur Country.