8 Ways to Raise Investment for Your Startup Business

Starting a business requires an enormous investment of time, effort, and – perhaps most importantly – money. If you’re not sure where to look, securing financing for your start-up can be a frustrating experience. Fortunately, there are many different sources of start-up business investment to consider. Find out more about eight of the most effective start-up business investment opportunities.

1. Bootstrapping

Despite the wide range of people and organisations that are interested in investing in a small business start up, not every business is going to find financing. But that’s not necessarily a problem, because bootstrapping – using your own money to get the business off the ground – can be a viable solution. Keeping your business lean and focusing on organic growth can help you build up an impressive client base, while you’ll also be able to retain equity in your business, rather than giving it away to investors before you really know what it’s worth.

2. Crowdfunding

Although it’s a non-traditional start-up business investment route, crowdfunding can also be a great option. Referring to the practice of generating funding by raising small amounts of money from large numbers of people, crowdfunding can whip up interest in your business while securing a readymade base of early users and brand advocates. However, with thousands of businesses pitching on crowdfunding websites like Kickstarter and Indiegogo, it can be difficult to make yourself stand out.

3. Bank loans

One of the most traditional forms of investment for a start-up business is a standard bank loan, which are offered by most high street banks. You’ll need to come with a solid, well-structured business plan, while you will often be required to provide substantial collateral (such as your home) against the loan. Bank loans can be beneficial as they provide access to large sums of capital while allowing you to retain all the equity in your business.

4. Equity financing

Another well-known type of start-up business investment is equity financing. Put simply, this means that you raise capital by selling shares in your company. Although you’ll be giving up full ownership of your company, equity financing can be a great way to meet a short-term need for cash. There are five main stages of equity investment for a start-up business, although it’s worth remembering that some of these will only apply to businesses with an especially high ceiling: 

1. Pre-seed – This is an informal term for the very first influx of cash for a business, usually raised by the founders themselves, as well as friends and family.

2. Seed – The seed round refers to the first official investment in the company from a small group of major investors. The amount of money you can expect to raise is usually anywhere between £500,000 and £2,000,000.

3. Series A – Next up is Series A, which can lead to £2,000,000 - £10,000,000 in investment. Generally, this is all about laying the foundations for your company and ensuring market fit.

4. Series B – Then, there’s Series B, which provides fast-growing businesses with the funds they need to scale quickly. A Series B round of investment tends to be around £10,000,000.

5. Series C – Finally, there’s Series C, which is usually raised to prepare a company for an IPO, a buyout, or to make an acquisition. Businesses can expect to make £100,000,000 plus with this round of investment.

Additional rounds of funding – following the naming trend of Series D, Series E, etc. – may also be suitable for some businesses.

5. Angel investment

Angel investment is a specific type of equity investment consisting of high net-worth individuals who make start-up business investments in return for convertible debt or equity. Angel investors will usually invest in a start-up business in the UK relatively early in the company’s lifecycle with the aim of getting a very high return on their investment. However, angel investors can also provide mentorship and networking, making them a valuable asset for many start-ups. If you’re seeking angel investment, the UK Angel Investment Network can be a great place to start your search.

6. Venture capital

Venture capital (VC) funds provide private equity investment for high-growth potential start-ups, helping them to scale. VC funds tend to focus on riskier prospects than other forms of equity financing, but they also take a much more hands-on approach, often holding a seat on the board. Having said that, accepting VC funding does mean that you’ll lose a sizable portion of your company’s equity, and if the fund takes an especially large stake, your level of control could be dramatically reduced.

7. Business grants

There are a broad range of business grants that are often used to invest in start-up business in the UK. The main benefit of grants is the fact that they’re non-repayable, so you won’t need to give away any equity in your business. Although the application process is intensely competitive, some grants are very niche, so if you offer a specialised service, they could be a great source of start-up business investment.

8. Incubators and accelerators

You may also be able to secure start-up business investment from accelerators or incubators, which are programs aimed at helping early-stage start-ups scale. Generally speaking, incubators are for start-ups in the very initial stages of building their company, while accelerators like Entrepreneur First are for existing companies with an idea and a business model. Accelerators may provide investment capital for a percentage of equity, but the real benefit of these programs is the opportunity to receive mentorship and network with fellow entrepreneurs.

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