The UK tech sector reported its highest ever level of investment in 2021, with over £29.4 billion invested in tech startups and scaleups. This year has started brightly too. Although the appetite to invest appears just as strong among VC and growth capital providers, the market has probably never been so competitive.
Do you want to make your startup an attractive offering to investors in such a crowded marketplace? If so, it is important to consider some key steps. The five outlined below should help you secure the funding you need to help accelerate your business’s growth. They will also give you a better understanding of what your business needs to succeed in the long term.
Decide on the appropriate funding model
The first key stage is asking yourself what type of funding you are looking for? There are a variety of different funding models available to tech startups. It’s vital that you choose the appropriate model for the development of your business.
Traditionally, startups have faced a binary choice of equity and debt. Whilst equity finance places no additional financial burden on your startup, there are drawbacks. You will have to share your profits and consult with your new VC partners any time that key decisions are taken that affect the company’s future. Debt financing does not give the lender a stake in the company. However, it places a financial burden on your startup, which may affect the pace of its growth going forward.
Investors, such as GreenBank Capital, are increasingly looking to take a different and more tailored approach in deciding on an optimal funding model for tech startups. This reflects the growing desire of investors to consider the unique challenges and needs of startups on a case-by-case basis. In any situation, looking at a one-size-fits-all approach benefits neither the startup nor the investor. Therefore, when deciding on a funding approach, you should consider which funding model best suits your startup’s present and future needs.
Research potential VCs and growth capital providers
Once you have decided on the type of investment you are looking for, it is time to find the appropriate investor match for your startup. Ensuring that the funder you target has the relevant experience is key. Look for an experienced capital backer with extensive knowledge of the tech and business sector. They can provide you with invaluable experience and expertise to help your management team drive the company forward. They can help you capitalise on opportunities for growth and expansion. GreenBank Capital is one such firm with over 100 years of investment experience and deep industry knowledge across its team.
Understand where your startup fits in relation to the market
Linking on from this, you must make sure that your product or service stands out amongst the competition before approaching potential growth capital investors. There are 1,843 startups founded per day in the UK. You have to demonstrate how your offer differs, and is hopefully better, than what your competitors are marketing. In doing so, it is vital that you assess the market impact your business is likely to make.
Does your startup change the status quo within the industry? Does it seek to democratise access to services or products previously unavailable to a certain group of people? Being able to answer questions such as these demonstrates that your management team has done market research to ensure that your products or services have the potential to succeed. This gives you a better chance to convince potential investors that your tech startup can be reactive and flexible. This is important in a sector that is constantly innovating and reinventing itself.
Develop a clear roadmap
Growth capital providers are looking for tech startups with a clear vision for their business’s future and the sector in which they intend to operate. Developing a concise roadmap, including key milestones which document the way ahead and signposts key successes, is important to help convince potential investors that your business has a well-thought-out strategy and a robust implementation plan.
Setting clear milestones will help you gauge areas in which your backer’s investment can best assist in helping grow your business. Highlight your successes for other potential investors to see. You should continue setting clear milestones even after you have secured funding. Use the expertise of your new investment partner to decide on realistic goals that can help you both understand how the business is growing.
Maintain a strong management team
No matter how ambitious your roadmap is, you will still struggle to attract growth capital without the right people to execute it. A strong management team is one of the most important things you need when building your business and seeking funding. Yet it’s one of the most difficult things to get right. It needs to have the right mix of skills, experience, and personalities.
In building your team, it’s important not to get frustrated. Some people are excellent in interviews but can fail to deliver. Others are the opposite. Take your time selecting the right type of people to join your management team, leveraging your own network to identify tried and trusted candidates if you can. Experience of building their function in businesses at similar stages of growth can be invaluable. It is one of the key elements needed to raise growth funding.
In closing
Although following the above five points won’t guarantee that you will raise the capital that you need, it should help give you an edge in what is the most competitive fundraising market for decades.
GreenBank is a merchant banking business listed on the Canadian Securities Exchange, the Frankfurt Boerse, and the OTC Markets in the USA. GreenBank invests in undervalued exponential growth companies focused on building consistent capital appreciation for its shareholders. GreenBank provides an extensive range of merchant banking services including but not limited to: Public Listings, Pre-Ipo funding, Private Equity, Mergers and Acquisitions, Reverse Mergers, Business Incubating, Corporate Restructuring.
In addition to investing in these exciting globally scalable businesses, GreenBank mitigates its overall investment risk by also seeking to acquire minority or majority stakes in established companies with proven profitability and cashflow, which in turn will assist GreenBank’s overall cashflow and ability to finance a progressive dividend policy.
