Getting your startup off the ground and realising your vision can be expensive. Businesses take time and money to grow, and revenue is often limited in the early days.
Most of the world's most successful startups received investments to help them get started, but finding and winning investment is a challenge in itself.
Those who invest in startups are often known as angel investors. They provide capital in exchange for equity in the business or convertible debt. Understandably, these investors are looking for lucrative returns, otherwise, there would be nothing in it for them.
As a result, you’ll need to not only find suitable investors but also convince them that your startup is worth investing in.
The right investment can be the difference between success and failure, but you need to know where to find investors and how to pitch to them.
In this guide, we’ll show you how to find someone who can invest in your startup and some best practices for a successful pitch.
Benefits of getting investment for your startup
Not every startup will need to secure investment in order to succeed, but it can have a major impact on your chances of success. All businesses need capital, although some need more than others.
As your business grows, more capital will be needed, but most businesses gain capital through revenue. For a startup, revenue is normally much lower, but costs such as employee salaries, rent, manufacturing costs and marketing all add up.
1. Fewer risks compared to a bank loan
Getting your business off the ground almost always takes capital, and for most entrepreneurs, taking out a bank loan is the easiest solution. Banks offer loans to businesses for a variety of reasons.
If you’re looking to start a new business, you could apply for a loan, and the process is relatively straightforward. However, there are more risks involved, and you’ll typically be offered less money.
With a bank loan, you’ll need to pay off the debt and any interest within a fixed term. When receiving an investment, there’s usually less pressure to pay it back as investors would rather see your company become profitable.
2. Accelerate growth
As a new startup, growing and establishing market share is important if you want to survive. If you have a new idea for a product or service, you’ll need to gain enough market share quickly to avoid losing out to competitors.
This often requires a lot of capital upfront, as you usually won’t have time to wait for your business to mature and start producing enough profit to grow organically.
Receiving investment allows you to increase business operations and fuels faster growth.
When you’re in a highly competitive industry, this is especially important. By investing heavily in marketing and sales, you can grow your business at a much faster rate.
3. Access to expert knowledge
Many angel investors are experts in the field they choose to invest in. They only invest in companies that they have previous experience in as it helps them pick the right investment.
As a result, you don’t just gain capital when you receive investment, you also gain their knowledge and experience, which will support you on your journey.
The investors themselves have a vested interest to help your business grow, so don't be afraid to ask questions and use their expertise to your advantage. It will become their advantage too.
Even angel investors who aren’t an expert in your field can still provide support through their business network. They’ll almost always have people and organisations they work with, many of whom could benefit your business.
Where to find startup investors
While it may seem like finding a good investor is like looking for a needle in a haystack, there are lots of places where you can find investment for your startup.
There's a lot of noise online. But with a little patience, you might find a few gems. Twitter threads are a great place to start your search, you'll find many eagle-eyed investors like angels and VCs on the lookout for the next best thing.
You can follow Twitter topics like 'Investing' to keep an eye on what's trending. LinkedIn is worth a shot too. You can search for venture capital firms on there and invite key people to connect with you.
Networking events are one of the best places to find investors who have experience and knowledge in the field of your startup.
These events are a chance to meet industry experts, learn more about the latest trends, and rub shoulders with people who could be interested in investing in your startup.
Alongside traditional networking, you can also make contact with potential investors through angel investor networks and organisations.
The UK Business Angels Association has over 650 members and invests over £2 billion into UK startups each year. Check out Beahurst's handy list of the angel networks in the UK too.
A startup accelerator is an organisation that offers resources, mentorship, capital and access to a business network.
You can enter an accelerator if your startup already has a working product or service that would appeal to potential investors. Anyone can apply to join a startup accelerator, but places are limited, and there’s a high level of competition.
When you join an accelerator, you’ll be part of the program for a fixed length of time alongside several other startups that were also accepted. The program aims to accelerate the growth of each startup, providing years worth of learning and capital in just a few months.
There are nearly 200 such accelerators in the UK, including PwC Scale Programmes, Upscale and Entrepreneur First.
Seed Enterprise Investment Scheme (SEIS)
The Seed Enterprise Investment Scheme (SEIS) is a venture capital investment scheme in the UK.
It was set up by the government to help assist new startups in receiving investment and allows your business to receive up to £150,000. Discover what you can do with SEIS investment.
Those who invest through SEIS can claim up to 50% of their investment back through tax reliefs, provided the company they invest in follows the rules of the scheme. Learn more about the tax benefits for investors and the rules they must follow.
Though in order for your company to qualify for SEIS, you’ll need to ensure that your company is established in the UK and has been trading for less than two years.
In addition, your startup shouldn’t have more than 25 full-time employees when the shares are issued, and gross assets should be under £200,000.
Note: some trades are excluded from SEIS; check qualifying trades here.
The first step is applying for advance assurance, which is essentially a pre-approval process conducted by HMRC. The only thing is HMRC's application process can be a little confusing, so we've produced a guide to help you through it.
In terms of finding SEIS investors, there are venture capital firms in the UK with SEIS-specific funds. ARIE Capital, Committed Capital and Draper Espirit are some of the biggest SEIS investors in the UK.
If finding individual investors is a struggle, crowdfunding is an option. That's when a startup pitches to the general public via an online platform like Seedrs, CrowdCube or Kickstarter. Crowdfunding is best suited to very early-stage companies in the process of fine-tuning their product.
How to pitch to investors
Finding potential investors is only one-half of it. You’ll also need to be able to successfully pitch your startup and convince people to give you their hard-earned money in exchange for equity.
To do so, you need to not only have a solid business plan but also be persuasive and show them why it’s a great opportunity for them.
Here are some tips for a successful pitch:
- Create a pitch deck
A pitch deck is a short presentation of slides that contain information on the most important aspects of your business, such as key financial data, your product and your team.
- Outline your vision
Your vision should provide potential investors with a clear picture of the goals and aspirations for your startup.
- Tell a story
Telling a story in your pitch helps make it more memorable and captures the interest of potential investors. Try to focus your story on how your business can help improve people’s lives or solves a real problem.
Securing investment for your startup can really boost your chances of success, making it easier to grow and gain market share.
While it’s not easy to find or convince people to give you funding, there are many ways to connect with potential investors. Securing their capital is easier when you have a solid foundation already in place.