It can be a minefield to figure out what investors are looking for from small businesses. BusinessZone spoke to Innovate UK about what the trends are at Venturefest recently.
Nigel Walker, head of access to finance at the public body, shared what elements of businesses investors are looking out for.
Innovate UK is the UK's innovation agency. It funds, supports and connects British businesses through a mix of people and programmes to sustain economic growth.
The body provides grants to about 1,000 small businesses a year across the UK and works with about four to five thousand at any one time. Of these, 60% are small and medium-sized businesses.
1. The right people
Walker is seeing a focus from investors on businesses that have good teams and scalable opportunities.
"They must be people they can believe they can work with and add value to what they do. Angel investors in particular want to be actively involved, so they seek passion and an alignment of interests," Walker explains.
2. Disruptive tech companies
Investors are looking for businesses who are disrupting their markets and are 'thinking five to 10 years ahead,' Walker says.
The sustainable sector is one example where this is happening, he adds.
"Looking to the future and anticipating what's going to happen is a big challenge but it also throws up a big opportunity."
Innovate UK supports existing disruptive technology companies around the UK, through providing them with help in areas that are not their core competencies, such as finance and networking.
3. Profit not the only motivation
In addition to businesses that are disruptive and have the right people, some investors will be looking for businesses where profit is not the only motivation for the owners.
Walker explained that there is room for both making a social impact and making profit in a business.
"It's not 50/50, where you choose to be comfortable and clear about your motivation, someone [an investor] will agree with you and if they don't then they're not the right fit," Walker says.
Finance options
Walker also shared his insights into what kinds of finance are most popular for small businesses he works with at the moment.
Crowdfunding is a good route to go down if a business is popular and appeals to a large amount of investors.
However, he adds, it is a challenge to get UK investors to provide larger amounts when businesses are at their second round of funding.
"Will first round investors put in more capital when the business needs to grow? Otherwise the investors won't make the returns they hoping for. This could become a challenge to the crowdfunding platform in the future.
"This is happening in places like the Silicon Valley but it's different in the UK - they are more reluctant here," Walker says.
Advice: Get a long term financial strategy
Parting advice from Walker for businesses looking for investors is to put together a long term financial strategy for business growth or a 'financial escalator'.
But, it's not just a simple, straightforward plan. Businesses should plan for setbacks and provide a realistic roadmap as to where they're going.
Walker used the analogy of the iconic Canary Wharf escalator, slick, shiny and straightforward.
"Many think of the finance escalator as the one you find in Canary Wharf. But this is not the image that should come to mind.
"I use Westminster Station quite a lot, there is a lot of stairs, you have to plan your route in advance. The reality of getting finance for growth is through putting all the pieces together.
"There are many different sources of finance out there. Take the time to get support and find the right route of growth," Walker says.
Nigel Walker, head of access to finance at the public body, shared what elements of businesses investors are looking out for.
Innovate UK is the UK's innovation agency. It funds, supports and connects British businesses through a mix of people and programmes to sustain economic growth.
The body provides grants to about 1,000 small businesses a year across the UK and works with about four to five thousand at any one time. Of these, 60% are small and medium-sized businesses.
1. The right people
Walker is seeing a focus from investors on businesses that have good teams and scalable opportunities.
"They must be people they can believe they can work with and add value to what they do. Angel investors in particular want to be actively involved, so they seek passion and an alignment of interests," Walker explains.
2. Disruptive tech companies
Investors are looking for businesses who are disrupting their markets and are 'thinking five to 10 years ahead,' Walker says.
The sustainable sector is one example where this is happening, he adds.
"Looking to the future and anticipating what's going to happen is a big challenge but it also throws up a big opportunity."
Innovate UK supports existing disruptive technology companies around the UK, through providing them with help in areas that are not their core competencies, such as finance and networking.
3. Profit not the only motivation
In addition to businesses that are disruptive and have the right people, some investors will be looking for businesses where profit is not the only motivation for the owners.
Walker explained that there is room for both making a social impact and making profit in a business.
"It's not 50/50, where you choose to be comfortable and clear about your motivation, someone [an investor] will agree with you and if they don't then they're not the right fit," Walker says.
Finance options
Walker also shared his insights into what kinds of finance are most popular for small businesses he works with at the moment.
Crowdfunding is a good route to go down if a business is popular and appeals to a large amount of investors.
However, he adds, it is a challenge to get UK investors to provide larger amounts when businesses are at their second round of funding.
"Will first round investors put in more capital when the business needs to grow? Otherwise the investors won't make the returns they hoping for. This could become a challenge to the crowdfunding platform in the future.
"This is happening in places like the Silicon Valley but it's different in the UK - they are more reluctant here," Walker says.
Advice: Get a long term financial strategy
Parting advice from Walker for businesses looking for investors is to put together a long term financial strategy for business growth or a 'financial escalator'.
But, it's not just a simple, straightforward plan. Businesses should plan for setbacks and provide a realistic roadmap as to where they're going.
Walker used the analogy of the iconic Canary Wharf escalator, slick, shiny and straightforward.
"Many think of the finance escalator as the one you find in Canary Wharf. But this is not the image that should come to mind.
"I use Westminster Station quite a lot, there is a lot of stairs, you have to plan your route in advance. The reality of getting finance for growth is through putting all the pieces together.
"There are many different sources of finance out there. Take the time to get support and find the right route of growth," Walker says.
