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We have done some research into best practice how to get investment and bring you some tips not only about sources of funding but what you need to be doing with your company to attract investors. Here are a few tips:

  • Pull together a strong team – finance managers who have been successful before, a good branding agency and mentors
  • Give your company a realistic valuation
  • Try to get a far down the line as possible to give evidence that investors would be on to a winner
  • Be prepared to meet quarterly milestones for VC funding and keep to your business plan
  • Look at crowdfunding – there are 44 platforms in the UK alone
  • Consider getting set up with the Seed Enterprise Investment scheme (SEIS) or the Enterprise Investment Scheme (EIS)
  • Imagine yourself in your investor’s shoes, could you give them a 10x return?

Several sources of investment

There are many sources of investment. It is often angel investors or venture capitalists (VCs) that spring to mind but there are many others and a useful list is provided on the Entrepreneur website.

It is worth bearing in mind though that 90% of startups are funded by entrepreneurs themselves. The advantage of this is that the business is yours and you don’t have to give away a portion of your company in return for funding. It can be tempting to throw everything at a startup in the belief that more money thrown at it will yield a better return. If you have ever seen Dragon’s Den, you will be aware that some entrepreneurs have frighteningly risked their houses to fund their startup companies. It is much safer to start small, keeping the day job and building the startup on the side to verify there is a real business their before taking out a massive loan with no real evidence of a market.

Angel investors and VCs

Before approaching angel investors (high-net worth individuals) or venture capitalists (private equity firms) a certain amount of preparation and research must be done.

Angel investors often invest through groups or networks. These provide due diligence, extra research, access to potential deals and shared expertise in particular sectors like biotech. Research is needed to identify the right investors for your sector.

Angel investors are usually thorough, so it can take some time to receive funding from them. It could take several months to meet with different individuals or groups and answer all of their questions. They will be looking for three qualities as well as high revenue growth/impact.

Because they’ll own a part of your company, they’ll likely want a say in major decisions, and they’ll watch to see whether you listen to them. One of the most important is keeping to the business plan i.e. the annual revenue growth and profit you say you are going to meet. Annual growth of 20 percent+ is outstanding growth, 7-8 percent per year is higher than average. Understanding the key drivers behind growth and how your business operates is key – this is the difference between a successful entrepreneur and someone with a pipedream.

 

 

 

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Cambridge, CB4 2HY

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da@watermillaccounting.co.uk