Thursday - 04 July 2019

Funding to start or grow a business

You've had a great idea for a new product, so what do you do next?

In this article for Business & Innovation Magazine, Vicki Strachan, Head Mathys & Squire's Oxford office, alongside Su Copeland of Priddey Marketing, provide some top tips on raising funding in order to develop your business. 

Some degree of product design is likely to be needed and you would expect the result of that, in the first instance, to be a minimum viable product (MVP) or working prototype that can be tested and ‘tweaked’ before the design is finalised for manufacture. This is, of course, a very simple description of what can often be a rather lengthy and complex journey which doesn’t end there, and, somehow, needs to be funded until sales revenue starts to cover the overheads.

In general, a new or growing business may (potentially) go through several rounds of funding to raise capital as it progresses along the road from concept to market, and these funding rounds can be broken into three broad categories, namely:

  • Pre-seed
  • Seed
  • Series A (and even B, C, D, etc.)

Raising capital can, in itself, be an arduous and frustrating process, but pre-seed funding, in particular, can be exceptionally difficult, because this is the capital you need for early-stage product development of an MVP, testing and finalising the product design. Not only that, you may need to pay for intellectual property registrations, market research, branding, etc. out of this capital, and yet you may not yet have anything viable for potential investors to buy into, nor anything tangible to borrow against.

There are a number of different ways to raise pre-seed funding, and although they are not all covered here, broadly speaking, many startup and scale-up ventures raise their pre-seed capital by one (or a combination) of:

  • crowdfunding;
  • grant funding;
  • private (angel or personal)
  • investment; and
  • R&D tax credits.

With the exception of R&D tax credits, all successful bids for investment/funding are likely to have one thing in common: getting the message right.

So how do you go about getting your message across and attracting the right investors?

It is rarely possible to effectively do everything that needs to be done yourself, and it is crucial to have an effective core team and good relationships with at least a couple of credible service providers, such as an intellectual property attorney, product designer, branding specialist and marketing expert. It is this network of people that you want an investor to recognise as credible and sufficiently effective to take the business to the next stage.

Su Copeland of Priddey Marketing tells me: “It isn’t easy to find the right investors, and doing so requires knowing where to find them and then having an attractive pitch.”

There is no doubt that the start-up journey is long and often complex. It almost always takes longer and costs more than you probably expected, but with the right people around you, and the right advice at the right time, you are much more likely to succeed in the end. Su has provided her top 10 tips below.

    Top 10 tips for attracting investors

    • Convey your story
    • Make yourself attractive
    • Do your investor homework
    • Do your financial homework
    • Don't just dive in
    • Tap into the government's tax incentives and funding
    • Use well-targeted networking to find the right investor
    • Keep the conversation going
    • Tap into online funding
    • Draw on your wider team

 

Vicki and Su, along with other STEM business advisers, will be exhibiting at the STEM Advisers Hub at Venturefest Oxford on 11th September 2019, so come and have a chat and let us help you move your business forward together.

 

This article was first published in Business & Innovation Magazine in July 2019.

About the Author

Vicki Strachan

Of Counsel

Vicki has a first class honours degree in Electrical & Electronic Engineering and specialises in technical fields such as power electronics, semiconductors, optoelectronics, robotics and computer-implemented inventions. She has many years’ experience of advising clients of all sizes on all aspects of intellectual property, with specific emphasis on providing IP advice and guidance to startups and SMEs looking for funding or growth.