4 Approach the right type of investor For example venture capitalists are often not the best route to fund start-ups or early stage businesses, unless the entrepreneur has an exceptional previous record of growing and successfully exiting a business. Typical investment by a venture capitalist is at least £1 million and more typically £5 million - beyond the needs of most start-ups. Business angels are far more likely to invest in a start-up or early stage business and will typically invest amounts from £50,000 up to £1 million (as part of a syndicate). In fact business angels are the largest source of finance for this market, investing over £1 billion a year. 5 Think differently Crowd funding for equity investment is also increasing in popularity and many early stage companies successfully raise funds through this route. Just a couple of warnings. Crowd funders do not bring any additional skills or expertise into your business (unlike business angels). It is also important to consider the funders motivation, for example crowd funders can be passive investors who want the tax breaks that go with investing and a decent financial return. Many crowd funding companies expect you to do the leg work and find the investors yourself. This can work well if you are a business with an existing customer base that may want to back you, but I have seen many campaigns fail to get any traction and this can be a big time waster. Remember you will only succeed if you are able to raise all of your funding requirement. Set a minimum amount that can work for the business and set a stretch target if your pitch proves popular.
3 Network, network, network Getting a personal introduction to an investor can make all the difference. Social media can be a great tool, but avoid ‘stalking’ business angels or sending unsolicited business plans. Learn to pitch your business in under 30 seconds (often known as the “elevator” pitch) and get the word out there by talking to as many people as possible in your network. You never know who might be able to help. Test your plan and your pitch on somebody unrelated to the business. The chances are if they understand it, an investor will too... If an investor doesn’t believe in what you are doing, they will move on to more attractive prospects. Don’t use jargon and industry acronyms - show that you are customer focused, that you understand the dynamics of your market and most importantly, how you will make money running the business?
1 Understand the aim and scope of your business. The industry or sector in which you are looking to start your business can often impact the type of funding which will best suit your aim. If you are looking to start a lifestyle business for example the chances are that you can fund it yourself or with a little bit of help via a loan from a bank or a reputable debt crowd funding platform. Success in obtaining finance will depend on proof that you can generate some cash in a reasonably short time frame and therefore are able to repay the debt when required. 2 Prepare your business plan carefully.. .. but don’t agonise over it. Well-executed, clearly written plans (I would suggest no more than four pages) are more likely to attract an investor than sixty pages of dense text. Investors receive a lot of business plans and get bored easily! A good business plan will grab the investor’s interest on the first page. Investors by their nature will often be attracted to opportunities where they can get excited and share the passion of the venture.
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