Venture Capital

A Venture Capital (VC) fund invests money and expertise in a business to help it grow.

“VC is not a transaction – it’s a partnership. We want to find someone we can work with, through the ups and downs of business, and build a relationship based on common trust and values.”

David Mott Founder Partner at Oxford Capital and Chair Of The Venture Capital Committee at BVCA

Killer Stat

Deliveroo, JustEat and iZettle all received Venture Capital backing in their early stages.

Key requirement

You must have a strong management team, who want to rapidly grow the business

Key benefit

You can get funding in Rounds, so VC can be a long-term finance option for businesses who want to grow

Key consideration

VCs expect to hold their investment for at least 5 years before they make a return

What is Venture Capital?

Venture Capitalists put money into early-stage businesses to help them grow. As well as money, businesses can expect strategic advice from an experienced new board member.

VC funds often invest in cycles of between five and seven years. They expect businesses to grow significantly during this time – and make a return for the fund. Sometimes, funds will hold on to an investment to help the business grow even further.

Businesses can often expect further investment ‘rounds’. Seed round investment is typically offered for proof of concept and can be several hundred thousand pounds. Series A investment onwards can be many millions.

What are the main Venture Capital schemes?

EIS (Enterprise Investment Scheme), SEIS (Seed Enterprise Investment Scheme) and VCT (Venture Capital Trust) encourage investment into UK businesses. EIS and SEIS give tax breaks to investors, so they are incentivised to invest.

Meanwhile, VCT helps de-risk investing by pooling investor money and spreading it across a range of businesses. The result is more investment in UK businesses.

What are the benefits of Venture Capital?

Relevance

VC is an option for a wide-range of companies. Profit, and in some cases revenue, are often not a requirement in the VC world.

Strategic guidance

Get support from experts and entrepreneurs.

Large injection of cash

You can get millions of pounds to expand your business, without giving away a controlling stake.

Regional opportunities

VCs regularly travel to regions across the UK.

What are the risks of Venture Capital?

Equity and growth

There is no guarantee that your business will achieve growth as a result of the investment.

Competition

Venture Capital investment is in high demand. VC funds may not be investing when you are looking.

“VC is an incredible partnership between financial professionals and founders. Many VCs are often ex-entrepreneurs, so their advice can be invaluable.”

David Mott Chair of the Venture Capital Committee @ BVCA

Is Venture Capital right for you?

About your business

Business StageEarly stage; no revenue or profit needed
Annual turnoverDepends on the business, but is often below £3m
SectorsAll
RegionsAll

About Venture Capital

Purpose of financeAcquisition; research and development
Amount of finance£1m+, depending on funding round
Duration of finance5 - 10 years
Cost of financeNone
Time to finance6-12 months

Ask an expert - what do investors look for in a business?

“There is a split between the investors whose first instincts are to identify a sector and those who look first and foremost at management teams.

“Sector-led investors look for revolutionary technological change or demographic positioning. Other VCs consider whether the founders have the vision and expertise to grow a business.

“A useful tip for entrepreneurs is to think about what sector they’re in and then work out if the product within the sector is the USP or if they are the USP.”

Tim Hames Director General @ BVCA

Venture Capital considerations

  • Board Seats VCs often expect representation on your board in exchange for funding and support.
  • Management Team The VC fund needs confidence in your leadership team, as there is very little else to go on for early-stage businesses.
  • Understand your VC VCs look for different things, so increase your chance of success by doing your research on the fund.
  • VC Mentality VCs expect some businesses to fail. Understand early that it's about relationships, as much as making money.
  • Economic Cycle Competition on funds depends on the economic climate. Sometimes funds are not investing much at all, and other times a business may have lots of offers on the table.

How do you get Venture Capital funding?

  • Both VCs and entrepreneurs can make the first approach
  • It often takes up to a year to do the deal, but this can vary

“The earlier VCs can start the journey, the better. Sometimes they’ll talk to entrepreneurs for months or years before they actually invest.”

David Mott Chair of the Venture Capital Committee @ BVCA

What's your next step?

In partnership with, BVCA

What sub-sets of Venture Capital are there?

Accelerator and Seed-Focused VC

  • Firms will invest early in companies, when the price is lower. It’s a risky investment, but the pay-offs can be bigger.

Corporate VC

  • Firms invest in an area close to the immediate interests of the fund. For example, the Venture arm of a large oil corporation might invest in new energy technologies.

Other finance options

IPO
Equity
An IPO (or Initial Public Offering) is when a business sells shares via the public markets, such as the Main Market or AIM operated by the London Stock Exchange.
Is this suitable for your business?
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Asset-Based Lending
Debt
A business secures finance against its existing assets; these can include invoices and also machinery, property and even intangible assets such as IP.
Is this suitable for your business?
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Direct Lending Fund
Debt
A business borrows money from a fund and repays it with interest. A fund may be able to provide loans where a bank will not.
Is this suitable for your business?
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