4 key steps that tech companies need to take when raising finance
As you may know, raising finance can be a necessary part of growing any small business. However, this can be a tricky process and it can sometimes be difficult to know where to start.
According to figures from Proactive Investors, UK start-ups have managed to raise more than $30 billion in 2021, which is more than double the amount in the previous year. If you want to secure capital to grow your business, here are four key steps that you’ll need to take.
1. Prove that your company has a niche
Competition for funding can sometimes be fierce. So, if you want to raise funds effectively, it’s important to be able to demonstrate how your company fills a market niche.
One of the main buzzwords that you might hear when searching for investors is “disruptive”, which is essentially how innovative your company or product is. In order to attract capital, it’s important to be able to show that you are breaking new ground and doing something that others cannot.
That’s why, if you’re having trouble focusing your pitch, it can sometimes be best to highlight what everyone else is not doing. Being able to show that you are a black sheep can sometimes be an advantage if you want to prove your business has its own profitable niche.
2. Create a wireframe concept
As you probably know, if you’re hoping to raise capital then it can often be beneficial to have a “proof of concept” to show to potential investors. However, tech companies sometimes have to wait until they’ve raised funds before they can actually build their product. As you might imagine, this creates a “chicken and egg” scenario.
This is why it can be useful to create a simple wireframe concept, so that you can demonstrate how your new app or technology will work once it’s fully developed.
Having this plan can be helpful as investors often like to know what their money is specifically going towards. Having this proof of concept to show them can show them that you’d thought through everything you may need to properly build it.
Furthermore, simply having the wireframe can also be useful to demonstrate that your team have the skills needed to deliver the final product. This can give investors confidence that their money is in safe hands, increasing the likelihood that they will invest in your business.
3. Explore your options for funding
Once you have all the necessary resources to market your company and products, it’s important to explore all avenues for securing capital. As you probably know, you have a wide variety of options for potential sources of investment. Some of the most common ones are:
Government loans
The UK government has a variety of schemes that you can take advantage of to grow your business. According to figures published in Sifted, the government invested more than £1.14 billion in start-ups during the coronavirus pandemic, partly due to the lack of private investment in that time.
If you’re looking for funding to expand your company, the government-backed British Business Bank can be a great place to start, as they offer a wide variety of loans that you can take advantage of.
Venture capital
Another option is to advertise your business to venture capitalists. These are investors who typically fund smaller companies with high growth potential. However, while they can be a good source of funding, you may have to be willing to cede some of the control of your company to them.
The British Venture Capital Association provides a useful directory of such firms in the UK that you could speak to.
Crowdfunding
In recent years, this has become one of the most popular ways to attract funding in the UK and there are a range of platforms that you can use. As you may know, crowdfunding not only gives you the opportunity to raise money and generate publicity, but also to gauge interest in your product.
Some of the most popular investor-focused crowdfunding options include Crowdcube and Seedrs, which can be useful if you want to raise money to grow your business.
Angel investors
These are typically wealthy individuals who aim to invest in start-ups early in their lifecycle, many of whom have launched successful businesses of their own. While you can sometimes work with individual investors, it’s often more helpful to pitch your idea to an angel investment network.
There are a variety of such networks in the UK, with many specialising in a particular market niche. For example, the Cambridge Capital Group typically invests in hi-tech start-ups.
4. Demonstrate that you’ve taken steps to mitigate risk
As you may know, when it comes to attracting capital then it can be important to demonstrate good financial sense to potential investors. This can help to persuade them that their money is in safe hands.
There are several ways that you can do this, such as good bookkeeping with your finances. One of the best ways you can do so is to show that you’ve prepared for potential future problems. This can demonstrate that you’ve done your research and are thoroughly prepared for expanding your business.
If you want to do this, ensuring that you have comprehensive insurance can be a great way to overcome any unexpected issues that the future may hold. Working with a broker can help you to find the right cover for your needs, making the process faster and easier.
Get in touch
If you’re looking to grow your company and want to protect it against any unexpected disruptions, we can help. Email creative@eggarforrester.com or use our contact form to request a callback from our team.
