Starting a business is exhilarating, but finding the startup funding to fuel your dreams can be a daunting task. Not only will you have to prepare your business by becoming “investment ready” but you will also need to find startup investors. In this guide, we’ll walk you through the essentials, focusing on equity funding – the lifeblood of many successful startups.

Understanding your startup funding options

Before starting to look for startup investors, it’s crucial to understand the different funding options available. These can range from equity financing, debt financing, to various types of grant. Here we focus on equity funding, where investors become partial owners of your business by buying shares.

Startup investors: Recognising the different types of investors

Investors come in various shapes and sizes, and knowing who might be interested in your venture is key. You’ve probably heard of Angels and VCs, but what do they do, and who are the other types of investors that make equity investments?

1. Friends & Family: For early-stage support, turning to friends and family provides a reliable source of startup funding. Friends and family know you, your passion for the business and the time you are committing to it. They may be prepared to back you with early investment. So your relationships don’t turn sour, be clear with your friends and family about the risks of backing early-stage startups, and be professional and clear in financial arrangements.
2. Crowdfunding: Crowdfunding platforms like Kickstarter and Indigogo empower startups to present projects to the public, securing funds from a community of backers in exchange for rewards or early access. Platforms like CrowdCube and Seedrs give startup investors the chance to buy shares in the business in exchange for the investors’ cash.
3. Accelerators and Incubators: While not direct investors in the traditional sense, accelerators and incubators can provide startup funding, mentorship, and resources in exchange for equity. Participating in these programs can open doors to a network of investors, increasing the chances of securing additional funding after completing the accelerator or incubator program. This article provides more information on how accelerators increase your chances of securing startup investors.
4. Angels: Business angels are individual startup investors who use their personal capital to invest in startups. They often seek companies aligned with their interests or expertise. They can bring more than just their cash. Often they have good business experience, knowledge of a particular sector and they may put their contact book to good use making introductions that help you secure sales, partnerships or even other startup investors.
5. Family Offices: Family offices represent private wealth management entities that manage the financial affairs of affluent families. These offices often engage in direct investments, supporting startups with significant capital and strategic guidance, aligning with the long-term interests and goals of the family.
6. Venture Capitalists (VCs): VCs manage pooled money from various sources to invest in startups and small businesses. They look for high-growth potential and a solid return on investment. As a general rule, they only back startups that are already generating revenue and have potential for fast growth.
7. Corporate Investors: Corporate investors, often part of larger corporations, offer not just financial backing but strategic value through industry expertise, mentorship, and potential partnerships, providing startups with valuable resources and market insights.

This isn’t an exhaustive list, and as your business matures other sources of financing such as strategic partnerships or Private Equity, amongst others may also become available to you.

Startup investors preferences matter

Just like customers have preferences about which brands they buy, so startup investors have different preferences about the businesses they will back. We’ve written before about how you need to craft a recipe that shows exactly how “tasty” your business for startup investors. Startup investors look for specific criteria in the businesses they back, which might include the sector, stage of development, and traction achieved. To increase your chances of success, focus on investors who align with your business.

Create Your Target Investor Profile

We encourage the startups we work with on Funding Accelerator to develop a clear understanding of their ideal investor, we call it a Target Investor Profile. It’s a bit like an ideal customer profile, but for investors. Be honest about what your business has achieved to date – and the sector, development stage, and traction level – and then focus on startup investors who are aligned with this. This targeted approach ensures you’re not casting a wide net but are focused on strategically aligned startup investors.

Build your startup investor Hit List

Once the startups we work have developed a Target Investor Profile, we support them by giving them the names of investors that match their profile and back businesses like there. We call this a “Hit List”. You can create a Hit List of potential backers yourself using platforms that help you find investors. Here are a few options:

Companies House
Companies House is the official register of companies in the United Kingdom, providing a comprehensive database of company information and ownership details.

• Pros: An exhaustive source of data about ownership of UK companies.
• Cons: Extracting the data can be challenging and may involve some heavy lifting.

Beauhurst or Pitch Book
Platforms offering valuable data on companies and investments

• Pros: They offer good data.
• Cons: They come at a cost; however, the investment can be worthwhile if you’re serious about finding the right investors.

Ship Shape
A free investor search engine that helps you find the individuals at VC firms interested in your specific domain.

• Pros: Great for identifying individuals within VC firms intested in your domain.
• Cons: More focused on Funds and VC than angel investors

Scribe Labs
A database of 150K Angels & Institutions and their UK investments

• Pros: An exhaustive source of data about ownership of UK companies.
• Cons: Once you’ve extracted the names of investors, you will need to find ways to contact them. Scribe can help with some LinkedIn and email data but you will also have to use your own routes to finding the investors.

UK Business Angel Association
A resource providing insights into angel investors.

• Pros: A valuable resource if trying to find UK based angel investors.
• Cons: It may not cover all potential backers, limiting the scope of available information.

Crunchbase
Database providing information on companies, key personnel, and funding rounds.

• Pros: Comprehensive
• Cons: Data is not always up to date. Free version has limitations; premium features require a subscription.

CB Insights
An intelligence platform providing insights into investment trends, startups, and market intelligence.

• Pros: Offers good insights
• Cons: Premium features come at a cost; more suitable for in-depth market research.

One more option: Funding Accelerator

If you are looking to fast-track your search for startup investors, our Funding Accelerator programme might be your secret weapon – we will help you unlock equity investment in 90 days.

• Pros: We’ll help you define the “right” investors, create a Target Investor Profile and “Hit List” of investors, as well as establish a process for reaching out, securing meetings, and building lasting relationships that lead to investment.
• Cons: Upfront cost, and it’s not suitable for everyone – Ideally start-ups should have not raised previously (or just done one previous investment round), have a product live with some early traction, and would like to raise between £100k-£1m.

Ready to Supercharge Your Funding Journey?

Finding startup investors may seem like a mammoth task, but with the right approach, it can become a streamlined process. Develop your Target Investor Profile, create a Hit List using various platforms, and if you’re looking for a shortcut to success, consider joining our Funding Accelerator. For more about it:

• Find out more about Funding Accelerator
• Or bring your funding questions to a Funding Strategy Workshop