Are you looking to inject some growth into your small business? The first step involves thinking about how to fund it.
Whether you are planning to expand your business in various new markets or launch some more products, you need a cash injection. Right?
Seeking investment can be a great way of funding growth for your business. Because debt funding is completely transactional, where you lend money and then you have to pay it back with interest.
London investors come in a wide range of sizes and shapes, from private individuals to venture capital organizations.
It might be challenging to convince potential investors to invest their money in your business. So, here, in this guide, we will discuss every detail about how to find investors for a small business in London!
How Important Are Investors for Small Businesses in the UK?
Sometimes, investors are the assets for a small business’s growth, improvement, and success. The funds they invest in your business, you can use that money to buy modern equipment, licensing, and other expenses.
The new approaches could speed up your business’s process, and you can stay ahead of the competition.
If you are facing inadequate staffing, you can also hire some more employees. You can use that fund for training and development so that they can learn valuable new skills.
You can also think of investing in a better onboarding program, such as flexible working, or season ticket loans, etc. These initiatives make your organization more attractive to new employees.
You can also invest some amount of money in a social media marketing campaign or invest in research and development.
Understanding Business Investment in London
Finding an investor is a great achievement for any small business in London. Are you an early-stage startup? You must understand the investment landscape to scale your business.
Any existing business looking to expand its activities into various markets can benefit from investors as well.
Investors, before handing over their money, will consider several factors. They consider whether your business offers an innovative or unique idea or products.
They also seek your business plan, and financial data, including your profits to date. expenses, and financial projections.
Investors will ensure that they can easily get their money back from the business when the time is right.
Types of Investors
- Private Investors: High-net-worth individuals will invest funds in exchange for equity in your business.
- Angel Investors: Individuals or groups invest funds in start-ups, typically offering mentorship.
- Venture Capitalist Firms: Invest in high-growth potential businesses, in exchange for equity.
- Crowdfunding Platforms: These online platforms let you raise funds from several small investors.
Investment Stages
- Seed Funding: Initial capital to develop a concept.
- Series A Funding: capital for scaling operations and boosting market share
- Growth-Stage Investment: Larger capital rounds focused on expansion, market dominance, and product development
How to Approach Investors for a Small Business
1. Get capital from Friends and Family
For an early-stage business, asking your friends and family members can be a great way to fund. You can ask them if they are willing to invest in your small business.
A loan will be easier to set up, but you need to repay the loan with interest within the time limit. The interest rates can be lower than if you borrow money from a bank in London. Approaching a family member for funding can be a quicker process, too.
Alternatively, your friend or family member would hold a stake in your business. This means you do not need to repay the fund; instead, your investor will get money if your business becomes profitable.
In contrast, if you lose, your investor might lose their money too.
2. Approach Private Investors
Private investors are individuals who will invest their money in your business in return for shares. The investors own a share in your company, and they have a say in your business.
There are two primary types of private investors, angel investors and venture capitalists.
Angel investors are generally experienced entrepreneurs, so when they offer funding, they also offer their experience and knowledge to your business operations. Their complete investment can be invaluable to your business.
On the other hand, VCs don’t invest their own money in your business. Instead, they provide strategic support to small businesses, such as mentorship, industry connections, and expertise to navigate the challenges.
Usually, VCs invest in well-established businesses and looking to launch new products or expand.
3. Contact Relevant Businesses
If you know someone in a relevant business of yours, you can contact them. You can ask them if they know someone who can have an interest in investing in your business.
You can attend industry-related events to enlarge your network and expand the pool of your investors.
Contacting similar businesses gives your business exposure to industry specialists. They may introduce you to their clients and investors, thus, you can strengthen your business network.
You can seek mentorship opportunities or partnerships. These initiatives enhance your chances of getting investors.
4. Crowdfunding
Crowdfunding can be another great way to find investors for a small business in London. These platforms enable you to collect money from several people online.
In this case, the investors are the general public. Plenty of crowdfunding platforms are there to choose from. Kickstarter, a renowned crowdfunding platform, enables you to start a fundraising campaign very quickly.
On these platforms, you typically offer various rewards to inspire others to invest funds in your business. On the donation-based crowdfunding platforms, the investors expect only the advertised rewards in exchange.
On peer-to-peer platforms, the investors offer you a loan, and you need to repay it. Equity crowdfunding is another great option to find investors, where they receive shares in your business and a proportion of its profits.
Tips for Approaching Investors
Getting some tips for approaching investors can be good to end this successfully. These tips definitely help you to obtain investors.
These also reassure you that your investors have a complete overview of your business landscape.
1. Create a Business Plan
You must have a thorough business plan to describe your business ideas to anyone. Many investors consider a well-written business plan before they invest their funds.
A well-written business plan surely helps you to stand out from the competition. Your business plan must outline what the company aims to achieve, how it plans to obtain the goals, and what its time frame is.
2. Ready a Short Pitch
Investors are generally very busy with their activities. So, it will be better to prepare a short pitch of 30 seconds.
The pitch must include what you do and what you are aiming to achieve. This pitch will concisely explain your ideas, and the investors can understand the small business quickly.
3. Maintain Clear Financial Records
Your start-up’s financial status has a great influence on whether someone will prefer to invest in your business. So, it is important to maintain a clear financial record of your business.
You need to have records ready to show a potential investor. Having all the essential documents indicates that your small business is a safe place for investment.
Wrapping It Up
Most early-stage start-up businesses require financial help to support their long-term growth and success. However, it might seem stressful to find potential investors for a small business in London.
However, anything is not impossible in this new era of technological advancements. Good advice and preparation can make complex things simple.
Here, we have outlined every possible way to look for potential investors in London. You can pick one or more options from the list that are perfectly aligned with your business needs and status.
One thing you need to remember is that investors will seek your proof of concept.
So, be sure to include all the essentials in your business plan and show them the potential for growth in your business!
