Venture capital

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 £5 million
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: £1 million 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.

Other finance options

Click here to visit Corporate Venture Capital

Equity

Corporate Venture Capital is an investment made by a large company into a smaller business, in return for a share of that business.

Purpose of financessss	Acquisition, research and development
Amount of finance	£1m+, depending on business
Duration of finance	3-5 years
Cost of finance	None
Time of finance	6-12 months

Business stage	Any
Annual turnover	Depends on the business
Sectors	All
Regions	All

Find a finance partner

Click here to visit Overdraft

Debt

Businesses can borrow money on demand up to the limit of their overdraft. Overdrafts can be expensive, but a business will only pay interest on the amount they actually borrow.

Business stage	Established with assets and a trading history
Annual turnover	Any
Sectors	Any
Regions	Any

Find a finance partner

Click here to visit 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.

Business stage	Established with assets and a trading history
Annual turnover	Variable – dependant on asset values
Sectors	Any
Regions	Any

Find a finance partner

Reference to any organisation, business and event on this page does not constitute an endorsement or recommendation from the British Business Bank or the UK Government. Whilst we make reasonable efforts to keep the information on this page up to date, we do not guarantee or warrant (implied or otherwise) that it is current, accurate or complete. The information is intended for general information purposes only and does not take into account your personal situation, nor does it constitute legal, financial, tax or other professional advice. You should always consider whether the information is applicable to your particular circumstances and, where appropriate, seek professional or specialist advice or support.

On this page