We explain the fundamentals of finding funding for startups - where to look and who to look for - in the first part of a series of articles on how startups can find investment.
Over the past few years, we’ve had the pleasure of working with a number of startups. From investment apps to green energy bidding platforms, the scope of the projects has been fantastic.
Through working closely with these up-and-coming businesses, we’ve learned a lot about the challenges that face them. And the one that’s universal to every project and every business is funding and investment.
Even the best ideas will get stuck on the ground if the money dries up, so it’s imperative that startups start planning for how they’ll find funding as early in the process as possible.
To help, we’ve put together this blog which will look at various avenues you can take to find the funding and investment your business needs, as well as a few investors that you could approach.
First, let’s take a look at the different ways you can get funding. This can be split into 7 groups:
1. Angel investors
2. Venture capital
3. Crowdfunding
4. Government startup loans
5. Peer-to-peer loans
6. Friends and family
7. Government grants
Let’s take a look at those in a bit more detail.
Angel investors
Angel investors are often individuals or small groups of investors that put their money into early-stage seed startups. Generally, angel investors will invest up to about £1 million. They’re a good choice for small tech startups that really need to get off the ground.
Venture capital (VC)
Unlike angel investors, venture capitalists are often organisations made up of many investors. VCs generally look to invest more money (£1 million+), and deal with companies that have already shown potential for growth. A great option for startups that are a little more developed.
Crowdfunding
Crowdfunding is a very popular and often successful way to find funding as a startup. There are many platforms to choose from, each with their own benefits. Genuine Impact, a startup we worked with in 2019, had great success on a platform called Crowdcube. Crowdfunding is a great choice for those who want to retain more of their company and potentially receive a higher valuation. It does, of course, have its risks; there’s a chance that you won’t make the deadline to reach your desired amount.
Government startup loans
In the UK, you can apply for a government loan of up £25k to get your business off the ground. And as well as money, you can also get help and advice for your business.
Peer-to-peer loans
RateSetter, Zopa and Funding Circle are three examples of peer-to-peer loan organisations. These organisations aren’t registered financial institutions, and instead, they’re organisations that bring together people who need loans with individuals that can offer them. The pros are that you can get a loan that you wouldn’t normally get from a bank. But the cons are that the interest might be higher than usual, and you might not get the same protections you’d get with a bank.
Friends and family
Borrowing from friends and family can be a great way to raise money quickly. Obviously, however, you have to be careful when mixing personal relationships with business ones. Avoid borrowing money from those who can’t afford it, and explain the risks very carefully to anyone thinking of lending money.
Government grants
There are many grants available from the government to help businesses, including startups. A good example of this is Innovate UK, which offers grants between £25,000 and £10 million to small, innovative businesses. You can also use websites such as Snap Out to sign up to get notifications of new grant opportunities when they become available.
Now that we’ve broadly covered the opportunities, it’s time to look a little closer at some of the organisations you could approach for investment.
Of course, you need to keep in mind that the company you try to get investment from is a good fit for your business. So there’s no substitute for researching investors that specialise in your particular niche or industry.
Even so, here are a few that we know are with looking at.
This Bristol-based equity club connects innovative startups with angel investors. They understand the kind of innovation and creativity a city like Bristol generates — just like we do!
With offices in London and Bristol, Ada Ventures make it their mission to help founders from diverse backgrounds. They’re a pre-Series A investor with a first cheque of £250k-£500k.
This Cambridge-based investor has a good reputation and very useful section on his website, giving you a comprehensive list of investment criteria.
This venture capital group could be great for those startups that are a little more established already, offering investments of £300k+ for tech startups.
Next, you’ll want to prepare as best you can for the meeting with investors. In our next blog, we’ll take a look at some of the questions you can expect and other ways to get ready for the big pitch meeting. So stay tuned for that!
In the meantime we have a ton other blogs about startups that you can read, including:
An interview with Alister Sneddon, former CTO and Co-Founder at Genuine Impact — a startup we worked with that went on to raise over £500k in their first round of crowdfunding.
A guide by former Newiconite, Joe, about how to start a startup — based on his extensive experience.
A look at Invest West — an organisation we’ve partnered with that helps join up startups and investors.
And, as always, if you’d like to get in touch to have a chat about your startup, get in touch!
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