How can tech start-ups attract venture capital?
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Written by Tom Montague - Sales Director.
While there may be no end of advice about how to make yourself a good proposition for online dating – when it comes to attracting investment, a photo of yourself with a dog or a mountain bike just won't cut it.

So, how do you find your perfect investment match?
There’s various sources of funding, from government grants to crowdfunding, as well as angel investors. But venture capital is one of the most effective ways to finance a new business, often offering large amounts of cash, along with industry expertise and advice.
"Venture capital is an incredible partnership between financial professionals and founders. Many VCs are often ex-entrepreneurs, so their advice can be invaluable," says David Mott, chair of the Venture Capital Committee at the British Private Equity & Venture Capital Association (BVCA).
But there's a lot of competition, with only about 0.05 per cent of start-up businesses receiving venture funding, according to financial advisor Fundera.
The good news is that UK-based start-ups are doing comparatively well. According to data from Dealroom this summer, venture capital investment in UK tech start-ups rose by 16 per cent in the first half of this year (2024), hitting twice the value of France and Germany combined.
Apart from the main VC firms, there are several UK-specific initiatives: the Enterprise Investment Scheme (EIS), the Seed Enterprise Investment Scheme (SEIS) and Venture Capital Trusts (VCTs); all who share the aim of encouraging investment into UK businesses.
The process is likely to involve an initial screening, during which the VC will examine the start-up's pitch deck – a short presentation highlighting the most important elements of the business proposition – followed by a partner review and, if all goes well, an in-person meeting where the business plan is carefully examined and discussed.
Next comes the often-complex stage of due diligence, and then an appearance before an investment committee before a deal is closed and the money appears.
Good storytelling equals investment success
There are a number of ways to make your tech start-up as attractive as possible to investors – most importantly through a coherent and easily explainable vision.
As Don Valentine, founder of VC firm Sequoia, has said, "The art of storytelling is incredibly important. And many – maybe even most – of the entrepreneurs who come to talk to us can’t tell the story. Learning to tell a story is incredibly important because that’s how the money works. The money flows as a function of the stories."
The first step is to develop a compelling business plan, covering the start-up's value proposition, target market, competitive advantage, and growth potential. This should include market research and an analysis of existing players in the same market space, with a focus on any USPs (unique selling points).
The business plan should also include a detailed analysis of operational costs, customer acquisition expenses, and realistic projections of the ROI (return on investment). Finally, with investment unlikely to be returned via dividends, a clear exit strategy is vital.
Finding the niche, solving the need
Investors, says the Development Bank of Wales, are looking for a start-up that solves a genuine customer need, and where there's a strong barrier to entry for competitors plus a reasonable level of innovation.
A large potential market helps. While there's always the chance of success with a more specialist proposition, investors will always prefer to take a share of a bigger pie. And they’ll need to be convinced that a start-up is going to be able to sustain any advantage, rather than just being a flash in the pan.
Meanwhile, some tech sectors are more investable than others – deep tech, for example — while others, such as cryptocurrency, not so much.
One of the most important factors in attracting venture capital, though, is the management team. Potential investors will be looking for a good balance of skills and experience, excellent connections within the industry, a good grip on finances, as well as strategic vision.
"There are clearly many factors at play in start-ups and many of them are constantly evolving," says the Development Bank of Wales. One thing that's certain is that there’s no such thing as 'perfect information', but if you can help give investors 90 per cent certainty, they only need to take a gamble on the remaining ten per cent in order to make an investment decision."
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