I did imagine that this would be difficult to start with a minimal marketing budget - I guess it is due to the fact that I have never tried Adwords and just assume that it is only a money making exercise for google with little benefit for myself.
You're right, it is a money making exercise, so as long as you keep that in mind it'll help you but there are a few things to consider. You need to keep your eye firmly on the ROI and your profit margins and before you start you need to look at those profit margins carefully and ask yourself "can I sustain the spend?"
Anyway, having read through the comments it is clear that I will need to at least attempt google adwords. That said, what would be the best approach for a startup website - I assume that allocating £100 to begin with would go rather quickly and would only attract a few hundred visitors.
I'm afraid that it's unlikely to bring in even 100 visitors for the big keywords. What you'll need to do is some extensive keyword research at product level and to try to pick off the low lying fruit first.
Essentially, would there be any long term gains in using up £100 now and google looking favourably to my webpages in future searches?
Many thanks
If you're asking will spending on Adwords now mean that Google will look favourably on your site with the organic listings then the answer is no. Officially, there is no connection between the organic listings and Adwords.
As Fisicx says, running Adwords will help you to get an idea of how your website is performing and what sort of traffic is out there for your keywords.
Keyword research is going to be paramount to this, backed up with a fair bit of market research (as I said before, you've done this the wrong way round but it's not too late).
Grab a coffee and a Google adwords account and spend some serious time working through Google's keyword planner tool (it's under the Tools menu), although again you need to accept that these figures should be used as a guide only.
Take that "bungee bird feeder" I mentioned before, Google is saying that there are 50 (rounded up figures) searches a month for this. Grabbing the low level fruit like this one can all add up.