Many startups fail, and only 10% survive. A great idea and a business plan are necessary, but so is knowledge on how to raise capital and find investors. With the right information, you can turn your startup into the thriving business you’ve always envisioned. This guide sets out the different stages investors invest in startups in the UK and also what to think about when pitching to SEIS and EIS investment funds.
Bootstrapping
At the Idea Stage, it can be difficult for companies to go about raising funds and finding business investors, so in many cases, it falls to the founder to provide the initial startup capital. While it’s important to understand that investing your own money can be risky, it also allows for complete control of the business void of any outside influence or conflicting visions. Bootstrapping is a great option for building small businesses. As the business grows, however, it is likely that you will not be able to sustain it with your own money, and will eventually need to bring in outside investors to invest in your startup.
Incubators / Accelerators
Businesses that show significant promise can apply to startup incubators or accelerators in order to receive a number of benefits, which may include a state-of-the-artwork environment, business mentorship, strong industry connections, and pre-seed funding for the most promising ventures. Being accepted into a startup incubator or accelerator is very difficult, as there is a significant amount of competition. Receiving funds is not a guarantee as many of these programs are designed to help founders and entrepreneurs grow their businesses by providing mentorship and resources other than money.
Pre-Seed Stage
Pre-seed stage investors like investing in a startup to help it grow and validate its market. In the UK one of the best avenues for pre-seed funding are SEIS and EIS investment funds which look to fund early stage companies which have received advanced assurance from HMRC. This allows investors to invest in startups combined with a host of attractive tax benefits. It is also important to remember that thinking what type of investors will be best for your business is also important. If you have a robotics business for instance, a fund that performs robotics investing would be better help than a general venture capital fund.
Angel Investment
Angel investors are usually wealthy individuals or organizations that can afford to invest in startups – they are like pre-seed stage funds, but are individuals rather than funds. Some angel investors invest in startups that are located in their own city or region e.g. just London. However, there is also a growing number of angel investors who invest in startups that are located elsewhere. Angels can also provide important help or insights to the startups they invest in.
Seed Stage Onwards
The Seed Stage marks the point in a company’s growth where all of the initial preparation comes to fruition and the business begins to acquire customers. For an entrepreneur, the challenge in this stage is to carve out a market share and to find a way to ensure repeated success. Once repeatable sales have achieved Series A funding may take place, followed by further funding rounds to help the business scale up. Generally at this stage SEIS and EIS investment funds give way to large venture capital funds
Where to find investors for your startup
When networking with others in your industry, it’s important to attend events and meetups to build relationships that could be beneficial in the future. There’s no guarantee you’ll find investors at these events, but you’ll definitely learn a lot and gain knowledge from other startup owners or business veterans. Try to create relationships that may benefit you in the future – you never know when or where you might find investors for a startup business. You should also try to search for where other start ups in your business area have successfully raised money from. Looking at the portfolio companies listed on SEIS / EIS investment funds websites can be helpful here.
How to prepare your pitch for your start up
To get investors for your startup, you need to have a well-thought-out business and marketing plan, including concrete plans and performance milestones. Additionally, you need to demonstrate demand or need for your product/service and know your industry inside and out. Investors will ask questions during your presentation, so make sure you’re prepared to answer them thoughtfully and thoroughly. Keep your pitch concise – no more than 15 slides with 20 minutes of content. Remember, becoming an expert in your field is key to a successful presentation.
Now that you understand the different types of investment funding for your start up and what to think about when pitching, it’s time to put your knowledge into action. By following the advice in this blog post, you should be able to raise investment for your start-up and take your business to the next level. Are you ready to get started?
