Venture capital

Investment to help young businesses grow. Alongside funding comes strategic advice from an experienced professional.

Venture capitalists (VCs) 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)Link opens in a new window, SEIS (Seed Enterprise Investment Scheme)Link opens in a new window and VCT (Venture Capital Trusts)Link opens in a new window encourage investment into UK businesses. EIS and SEIS give tax breaks to investors, as an incentive to invest.

Meanwhile, VCTs help take away some of the risk of investing by pooling investors' money and spreading it across a range of businesses. The result is more investment in UK businesses.

Relevance

Venture capital 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.

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.

About your business

  • Business stage:  Generally early stage, pre-revenue or pre-profit
  • Annual turnover:  Less than £5m
  • Sectors:  All sectors, but especially suitable for companies with a scalable business proposition
  • Regions:  All

 

About the finance

  • Purpose of finance:  Acquisition; research and development
  • Amount of finance:  £1m or more, depending on the funding round
  • Duration of finance:  5–10 years
  • Cost of finance:  None
  • Time to finance:  6–12 months

Ask an expert: Tim Hames, director general at the British Private Equity and Venture Capital Association (BVCA)

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 unique selling proposition (USP) or if they are the USP.

Board seats

VCs often expect representation on your board in exchange for funding and support.

Strong management team

The VC fund needs confidence in your leadership team, as with early-stage businesses there's very little else for the investors to go on.

Understand your investor

VCs look for different things, so increase your chances of success by doing your research on the fund.

Mentality

VCs expect some businesses to fail. Understand early that it's about relationships as much as it is about making money.

Economic cycle

Competition on funds depends on the economic climate. Sometimes funds are not investing much at all, while at other times your business may have lots of offers on the table.

Either you or the VC 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 an investor will talk to entrepreneurs for months or years before they actually invest.

To learn what steps you need to take to ready your business for venture capital, use this checklist.

After a momentous 2020, 2021 will see businesses still needing funds and VCs still seeking opportunities to invest. Learn five things VCs are looking for in 2021

 

“Venture capital 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 at BVCA

Other finance options

Click here to visit Expansion Capital
Equity
Expansion Capital firms give established businesses money to grow and reach maturity.

Expansion Capital

Investors like

Post revenue, profitable and growing businesses with a turnover typically between £5m and £50m. Businesses need to be willing to give up a stake in the business in exchange for finance.

You're looking for

Between £2m to £20m, depending on the shareholding you’re offering, to create new products, enter new markets, acquire other businesses or invest in new systems or equipment to drive growth.

Find out more about Expansion Capital
Expansion Capital
Equity
Private Equity firms invest in established businesses in return for a large or controlling stake, to help them grow to the next level.
ABOUT Expansion Capital
Purpose of financessss Create new products, enter new markets, acquire other businesses or invest in new systems and equipment to drive growth
Amount of finance £2m-£20m (depending on % shareholding acquired and value of company)
Duration of finance 3-5 years
Cost of finance Due diligence and legal fees will apply. If you appoint an advisor, they will expect a retainer fee
Time of finance Minimum of 3 months but can be up to a year
About your business
Business stage Post-revenue, profitable and growing
Annual turnover £5m-£100m
Sectors All
Regions All
Click here to visit Angel Investment
Equity
Angel Investors act as mentors and invest their own money in early-stage businesses for a share in the company.

Angel Investment

Investors like

Early-stage businesses with a turnover of less than £5m. They invest in any sector but like businesses with a scalable business proposition.

You're looking for

Between £15,000 and £500,000 within two to six months from a single Angel for working capital, product development, entry into new markets, to build teams or increase sales. Large Syndicates may offer up to £2m.

Find out more about Angel Investment
Angel Investment
Equity
Private Equity firms invest in established businesses in return for a large or controlling stake, to help them grow to the next level.
ABOUT Angel Investment
Purpose of financessss Working capital, product development, entry into new markets, build teams, increase sales
Amount of finance Usually £15k-£500k, but large Syndicates may offer up to £2m
Duration of finance Typically 3-8 years
Cost of finance None
Time of finance 2-6 months
About your business
Business stage Generally early stage, pre-revenue or pre-profit
Annual turnover Less than £5m
Sectors All sectors, but especially suitable for companies with a scalable business proposition
Regions All regions
Click here to visit Export Finance
Debt
Businesses can get guarantees and protection against late and non-payment by their customers to reduce risk of selling overseas and help fulfil their contracts.

Export Finance

You need to be

Looking for finance to help you sell your product or service overseas.

You're looking to

Grow your customer base internationally and need finance to enable you to do so.

Find out more Export Finance
Export Finance
Equity
Businesses can get guarantees and protection against late and non-payment by their customers to reduce risk of selling overseas and help fulfil their contracts.
About your business
Business stage Established with assets and a trading history
Annual turnover Any
Sectors Any
Regions Any

Regional support

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