Essential Tips to Start-Up Funding Stages

Money will keep your start-up progressing, it’s as simple as that. In an ideal world, it would be easy to secure funding. But, this can prove to be the most difficult stage for any start-up. To try and help maximise your chances of success, here are some essential tips to start-up funding stages.
 

Know Your Funding Stage

‘How mature is your product?  Is it still a prototype, for example, or is it ready for commercial use?  Do you have customers and revenue?  These are the sorts of things that define where you are in the business cycle and hence what sort of finance you might be looking for.’ Graham Oakes, Founder, Upside Energy Ltd

The typical start-up funding cycle is:

  • Concept stage
  • Pre-seed
  • Seed
  • Early stage
  • Later stage
  • Initial public offering (IPO)

When we’re talking about securing funding, it’s important to know where you are in this cycle. How mature is your start-up?

Be realistic about where you are in the funding stages!

Reassuring potential investors that you know where your start-up is in the cycle is essential. Showing self-awareness will make you seem like less of a gamble.

Remember, you’re trying to attract investors. So, demonstrating a good understanding of your start-up and what funding is needed will make your business seem like a safe bet.

In the early stages (concept/pre-seed/seed) it can be difficult to secure funding. For investors, this is when your start-up is seen as a bigger risk! Government start-up grants, like those from Innovate UK, can provide the investment you need in these early stages.

Be Clear on What Your Funding Is For

‘Pitch a crystal-clear proposition and vision with personality and passion, and back it up with a realistic valuation to attract investors.’ Luke Lang, Co-founder, Crowdcube

Make sure you’ve clearly laid out how your requested funding amount will benefit your business. All the money you ask for should be justified!

Map out your targets and explain how the funding will be appropriate.

The funding cycle usually includes:

  • Exploration
  • Validation
  • Building
  • Launch
  • Growth
  • Maturity

Prove to investors that you have a clear idea of this cycle and that you know what direction your business is going in.

A good pitch will give you the best chance of securing funding!

  

Target Relevant Investors

‘Research your potential investor- what’s their risk appetite? What companies do they invest in and at what development stage?’ Don Spalinger, Director, Research & Innovation Services, University of Southampton

When it comes to attracting investors, three things are essential when knowing who you’ll appeal to:

  • Your financial needs
  • Progress to date
  • Appropriate milestones

Asking for the wrong amount could have disastrous consequences for your chance of securing funding. You could lose all your credibility in terms of investment. Therefore, make sure you’ve researched all potential investors.

If your start-up is in the seed and early stages, you’ll be targeting investors who will invest their own money. Alternatively, at this stage, your own employees may be tempted to invest in your start-up.

At the later and IPO stages, when your start-up is nearing going public, your start-up can be invested in by anyone, such as investment bankers.

Get the Right Funding at the Right Time

‘Identify how much funding you need to reach the next milestone in the growth of your business - be clear to investors why you need that level of investment and how you will use the funds raised.’ Jenny Tooth OBE, Chief Executive, UK Business Angels Association

One important rule for start-ups to remember is: timing is everything.

Trying to break into an already highly-saturated market, or a market that’s not ready for your idea, can cause your start-up to fail.

When it comes to success, the way you execute your business plan is the most important step, followed closely by your business idea and business model.

So, the right funding at the right time will maximise your chance of long-term success.

Getting funding at the wrong time may mean you have little left to offer future investors!

If you’re interested in finding more essential business tips like this, subscribe to Innovate UK’s YouTube channel.
If you need help growing your business and boosting your online presence, find out how we can help you here.
 
 

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