London & Partners’ Routes to Finance report says successful start-ups must follow their own unique “funding lifecycle”, beginning with bootstrapping…
For British start-ups looking to scale – whether expanding internationally or supercharging operations here in the UK – equity investment is, now more than ever, a very promising prospect.
According to Routes to Finance, a report released by London & Partners, the first half of 2017 was a record period for equity funding. Over £3bn was invested in UK fast-growth businesses – an eye-watering 74.7% increase on the half-year before it – and, during this time, the average equity deal was worth more than £5.5m.
While London & Partners allows that “equity investment is just one source of business finance”, it says that the current climate between equity investors and ambitious start-ups is conducive to potentially fantastic deals in every form, from the government’s SEIS (Seed Enterprise Investment Scheme) to crowdfunding.
But different forms of investment will be right for your start-up only at certain stages of its growth, and London & Partners asserts that every successful business must travel through its own “funding lifecycle”.
As Routes to Finance explains, every business’ journey will be different. However, each will tend to begin with a bootstrapping phase during which founders will borrow small amounts wherever they can – whether it’s from family and friends, savings, company revenues or even their overdraft.
This is typically followed by early seed funding, then rounds of debt and/or equity finance. Depending on the business, this can eventually lead to exit.
Fortunately, London & Partners reports that with each successful round or raise, businesses become larger and more experienced – and therefore more likely to complete another, bigger round in the future and grow even more. Yvonne Haizel of Mitsui & Co is quoted in the report as saying: “Success becomes likelier with each next funding round.”
While the main body of Routes to Finance offers a guide to each main method of raising finance, the report also offers three pieces of advice to those who are looking to raise:
- Thoroughly research your market, the investment community and potential investors.
- Be sure to accept finance from an investor who will help your business to grow, beyond just offering money.
- Be prepared to dedicate a lot of hard work and time, from building relationships with investors to pitching and negotiating.
The report also advises entrepreneurs to be wary that the often mammoth task of raising finance will take them away from the day-to-day running of their business, so strategies must be in place to continue driving the business and keep up momentum.
