The most effective way of raising venture capital is to select just a few firms to target with your business proposition. The stage your company is in, the industry sector in which your business operates, the amount of finance needed and the geographical location of your business all factor in the mix.
To find the right investor a good place to start is our directory. It lists members of the British Venture Capital Association (BVCA) from across the UK.
A bit of research will be appreciated by venture capital firms as it shows them that you have thought carefully about the type of investment partner you want and are not only seeking a cash infusion.
To allow a business concept to be developed, the production of a business plan to be completed, prototypes made or additional research conducted, a company may seek seed capital. Seed capital is usually a smaller amount and often is supplied by business angels, click here for our section on business angels.
For companies that are beyond the product development stage and want to initiate early stage commercial manufacturing and sales, or expand a business, a substantially larger investment may be needed. Early-stage financing can be around £500,000; expansion financing around £1 million and management buy-outs and buy-ins around £5 million.
The process for investment, however, is similar. Whether the amount sought is £100,000 or £10 million, the amount of time and effort venture capital firms have to spend in appraising the business proposal prior to investment is the same.
For this reason, medium-sized to larger investments are more attractive for venture capital investment, as the total size of the return, rather than the percentage, is likely to be greater than with smaller investments.
Professional advisors – such as accountants or solicitors – are often used to give guidance in developing business plans and approaching investors. Advisors' fees can vary greatly depending on the complexity of the transaction but typically this charge will be around 5% of the money being raised.