Investment, Entrepreneurs

For new businesses, finding investment can be the most nerve-wracking part of getting set up. With thousands of start-ups springing up every year, investors receive dozens of pitches every day, and it will take something special to convince them that yours is the right company to choose.

It is not uncommon for entrepreneurs to meet with dozens of investors before they are able to secure any funding, which means that it is best to try to research as many different types of investor and types of funding as possible, to give yourself a better shot at finding the right fit for your business.

Some of the avenues you could consider include:

 

Angel Networks

An angel investor is a wealthy individual looking for small businesses to invest in, with the idea being that if they choose the right investment, they will be able to capitalise on the ‘next big thing’ right at the start.

An angel investor is a great option for small businesses, as they not only supply capital, but are also able to provide mentorship, business advice and access to their own business networks.

Finding an angel investor means putting in the time and effort, looking for the right type of individual who will fit with your business and take a real interest in what you are selling.

There are a number of angel networks online, with a couple of the best being the Angel Investment Network and the UK Business Angels Association. Both have thousands of angel investors available, with information available on the types of investment they are looking for.

 

SEIS/EIS

Securing investment means more than having a great idea and a strong business plan. One of the key factors in getting investment in the UK is your SEIS/EIS eligibility.

The Enterprise Investment Scheme (EIS) and the Seed Enterprise Investment Scheme (SEIS) are two programmes set up by the government to incentivise investment in small business through tax breaks. Your business will be a much better prospect for any investor if they are able to see a return on their investment right away.

  • SEIS is for the smallest businesses, still at a very early stage (or Seed stage). An investor is able to invest up to £100,000 every tax year under this scheme, to receive a 50% tax break. Start-ups and entrepreneurs are able to raise a maximum of £150,000 in SEIS funding.
  • EIS is more suited to businesses who are further along in their development, as investors are able to put up to £1m into the business per tax year, to receive a 30% tax break. Businesses can receive a maximum of £12m in EIS funding.

Under these schemes, investors also benefit from not having to pay any inheritance tax on shares owned, for a minimum of two years. If a loss is registered on shares sold at any point, the investor is able to offset these against their capital gains tax burden.

The HMRC website provides an exhaustive list to help you to decide whether or not you are eligible to apply for either scheme.

 

Crowdfunding

Whilst crowdfunding has gotten something of a bad reputation in recent years, with a proliferation of crowdfunding websites and causes springing up at once, it is still a promising idea for start-ups and entrepreneurs.

Because you come to a crowdfunding platform with your own marketing and community, it provides investors with a better idea of how successful your business is likely to be. To make your crowdfunding project more likely to be successful, it helps to:

  • Bring your own crowd. With investment from your own supporters and community, investors are able to see that you already have an interested crowd, making investment in your company appear less risky.
  • Take time to market yourself. You want to provide proof that you are dedicated and business-savvy, and are able to create a buzz on your own before an investor has even gotten involved.
  • Stand out from the crowd. Work out what your USP is and capitalise on it. Make sure that you have a brand that can’t be ignored.

 

Friends And Family

According to research, 38% of funds raised by start-ups comes from friends and family. These are the people that are likely to care the most about your success, who will have the most trust in you and won’t charge you significant interest or want to take huge shares. For start-ups, this can be the least stressful way of securing funding.

Bear in mind, though, that although your friends and family are unlikely to ask difficult questions about financial projections and business valuations, they will want to see that their money is being used well. In some cases, the pressure to achieve can be even more when the money tied in with the business belongs to the people closest to you.

You must also be sensible and ensure that you work with a lawyer when it comes to drafting up your venture deal, so that they can explain the risks and benefits and make sure you have a solid agreement put in place.

 

Venture Capital

Venture capital funding is one of the trickiest and most difficult forms of funding to obtain. Most start-ups will never get it and many argue that they should never even try to!

Most businesses who look to venture capital funding are those who have already been around for some time and have proven their worth and market value. It is at this point that they’ll look into venture capital to give them the extra funding they need to expand.

Venture capital companies are looking for businesses who can offer real proof of their value, as well as a firm understanding of the exact route they need to take to expand. They don’t want to take a supporting role, simply capitalise on what is already there by providing the funding necessary. It is also true that this type of investment often means giving up a lot of control, which businesses can find it hard to take.

As mentioned previously, it is an option, and one which many companies have taken up successfully, but there are arguably better options when you are first trying to score investment.

 

Next Steps

Seeking investment is your business is a complex process, and to ensure success you need to have a convincing “pitch”. Without one of these, then your chances of finding funding are greatly diminished.

You need to demonstrate you have a firm understanding of where you are now, and where you want to be. Being able to show a firm grasp on the marketplace and a deep knowledge of your finances, with a costed and comprehensive business plan, goes a very long way in convincing someone that an investment in you is going to succeed for both parties.

An Accounting Gem can work alongside you in getting your business plan and financial projection to the standards required. Our expert team have extensive experience in helping businesses large and small with this process and would welcome the opportunity to work with you.

Call today on 01473 744 700 or email us at contactus@aag-accountants.co.uk to see how we can help you and your business.