How to find investment for your start-up
One of the most common challenges start-up founders face is raising investment.
In this blog, we will provide a quick guide to the most common ways and share some useful information with anyone who is looking to raise funds, despite which stage of your investment journey you are in.
The common ways to raise investments are:
- Incubators / Accelerators
- Angel investors
- Venture Capital (VC) funds
Grants are suitable for any stage of start-ups or scale-ups as long as you are willing to invest time to look and apply for them.
Grants are a great way to get money for your start-up as this way you don’t need to give money back – it’s not a loan. However, there are many grants available at once and you might need to dedicate a lot of time to find suitable options for your business as well as spend time on separate applications. Don’t forget to keep an eye on the deadlines too!
We’re constantly covering new grants and sharing some information with our founders. If you would like to be part of our mailing list, subscribe to I am a Founder newsletter. Recently, we looked at Innovate UK.
Innovate UK is an innovation agency, which provides money and supports organisations to realise the potential of new technologies, develop ideas and make them a commercial success. It was founded in 2007 and is part of UK Research and Innovation.
Innovative UK offers grants between £25,000 and £10 million as well as innovation loans (between £100,000 and £1 million) and continuously runs other various competitions. Find out about Innovate UK here.
Incubators & Accelerators
Incubators & Accelerators are great for Pre-Seed and Seed level companies. However, they might not be accessible to all businesses due to the pricing, but they certainly provide great resources and early access to VCs.
Both organisations provide businesses not only with cash investment but also a dedicated amount of resources such as operational advice from mentors on business models, business plans, products, tech and other fundamental areas in businesses. The goal of these services is to help accelerate start-ups over a defined period of time.
Not all of these organisations can provide cash investment so if cash is an absolute must in the short term, an incubator/accelerator might not be the best course of action. If you’re a first-time founder, these resources can be invaluable to getting your business off the ground.
A good list of incubators and accelerators in London can be found here.
Crowdfunding is suitable for most start-ups and scale-ups and allows you to tap into a larger community of potential customers, with easier entry points for them to invest in your business (as low as $10 or $20, as opposed to thousands and more). It’s rather easy to use, but most platforms require you to raise the full goal amount to receive the money.
Angel investors can offer a significant source of growth capital funding, particularly at the pre-seed and seed stage, often before VCs invest. It can be a quick source of capital, however, you might need many of them to fulfil your investment round.
Angels investors are likely to be the very first private investors into start-ups, but despite being so important to the landscape and UK economy, they are hard to be found. The majority of them don’t actively market themselves. To optimize your time during fundraising when looking for angel investors, apply for Advance Assurance for EIS/SEIS in advance. Our team of experts can support you with all the administrative hassle.
Find out more about the most active angel groups in the UK in our previous blog.
VC investment is normally sought by the later stage scale-ups – Series A, B and later. It allows them to raise large sums of funds, accelerate growth and boost their profile.
It is a very time-consuming process and requires a lot of preparation before reaching out to VCs but stay positive – the number of VC funds out there is more than ever!
Most VC funds have some form of strategy, either by the sectors they invest in and/or the strategy (i.e. pre-seed, seed, Series A etc.). Before going down this route, you need to consider the fundamentals of whether the VC path is right for you and your company. Read our previous blog on how investors operate to find out what to expect.