Seeking out investors can feel like looking for a needle in a haystack. And in many ways, it is.
With 99.9% of private businesses in the UK being made up of SMEs, the competition is huge and getting noticed is a challenge.
But, compared to risk-averse bank loans, venture capital investors are innately drawn to taking big chances with those UK startups who have the potential to make waves in their markets.
While there’s no getting around the highly competitive culture of investment and venture capital funding, the potential for success will make the hard work worth it.
Why is Investment Important for Startups?
Although the challenges of investment can be off-putting, finding and harnessing the power of effective investor engagement can help your business grow and succeed rapidly.
Most investors seek early-stage startups and want to embed themselves into the business to create mutual gains. The more they can help, the more you’ll both reap the rewards of success.
Many VCs and investors will provide mentorship and have specialised expertise in your market, meaning that you’re in a better position to anticipate and solve challenges before they rear their heads.
Investment also breeds investment. Getting that first seed funding and making the most of it can help you attract the attention of other investment opportunities. It will build credibility and show the world your business is worth investing in.
How to Work with VCs
As this will be a close-knit working relationship, it’s essential to know what investors want and need from you to make the most of your alliance. Investment is all about high risk, high reward, with most investors looking for a 10-50% return on investment, so it can be an intense and demanding partnership.
It can also be a lengthy process, sometimes taking nine months for them to make a decision and conduct due diligence, so as difficult as it is, you’ll need some patience.
Once they’re in, they’re in and will most likely require a place on your Board of Directors. For your quarterlies, they’ll want to see reports, metrics, and results of their investment and projected forecasts of the business’ growth. This is also a chance to develop a strategy informed by your investor’s expertise and solve challenges together.
They will also likely probe the business throughout the relationship, asking questions to provide third-party evaluations. This will encourage you to analyse your business and think in ‘bigger-picture’ terms. Innovative investment means taking big swings and making major moves. They want you to make money and grow quickly, so it’s crucial that you, your team, and the business can handle the pressure.
How to Maximise Your Success
Simply having investment does not guarantee victory. This is where it begins. To secure longevity and get the most out of your investment, you’ll need to plan strategically and incisively.
Strategic Allocation: Allocate funds wisely, prioritising critical areas such as product development and innovation, marketing, and hiring key talent.
Focus on Growth: Use the funding to accelerate growth by expanding customer acquisition efforts, entering new markets, or scaling up production.
Financial Management: Monitor finances closely, ensuring budgeting and cash flow management to sustain the business in the long term.
Engage with Investors: Keep investors informed about progress, milestones, and challenges, fostering a positive relationship and potentially securing additional funding.
Stay Agile: Remain adaptable and responsive to market changes, adjusting strategies and tactics as needed to capitalise on emerging opportunities and mitigate risks.
How to be ‘Investment Ready’
If you’re unsure how to be investment-ready and what you’ll need to do to ensure it, join us for Investment Readiness at Plus X Innovation in Slough, a two-and-a-half-day intensive programme funded by the UK Shared Prosperity Fund.
Our investor module will be run by Damon Bonser, founder and CEO of the British Design Fund. The fund invests in Seed and Pre-Seed stage British businesses with a purpose. The fund is very hands-on with its founders, enabling its startups to focus on growth and raise follow-on investment.
During the programme you will also take modules on investment strategy, pitching, and more with a whole host of impressive mentors with lived-experiences.
You’ll leave the programme with an impressive pitch, elevated strategy, and newfound confidence, ready to embark on your next funding round.
If you’re a London-based, ambitious SME, startup or scaleup ready to take on investment, apply today, taking place in June 2024.
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