• Financial Planning
• Raising Finance
  • External Finance
    • Bank Loans
    • Borrowing Against Invoices
    • Making Use of your Assets
    • Lease assets rather than buying?
    • Angel Finance
    • Venture Capital
    • Float your Company
    • Grants
• Bank Articles
• Support Schemes
• Local Finance Support Schemes

Venture Capital

If you’re looking to raise more than £1 million and are prepared to relinquish some control and of your business, then venture capital funding may be appropriate for you. Venture capitalists (VCs) provide finance to ambitious early stage growth businesses in exchange for a stake in the company. Typically, they help finance a major expansion strategy. The VC takes some of the risk, has a say in the company’s direction, makes a high return and usually seeks to exit in three to five years, often through a trade sale or, in a few cases, a market flotation.

In Brief – Venture Capital

• It usually takes between three and eight months to raise finance, sometimes more
• Owner-managers will often be expected to give up at least 20 per cent equity
• Regional Venture Capital Funds provide ‘equity gap’ funding of up to £500,000
• VCs back high-growth strategies, such as acquisitions; product or service launches; new premises; or national, European or global business expansion
• An exit through flotation or trade sale is expected within three to five years

PROS

• Some investors can add valuable skills and open doors for your business
• Investors may provide follow-up funding as your business grows

CONS

• An estimated 95-98 per cent of funding proposals are rejected by VCs
• Medium-sized to large investments are more attractive than smaller investments