How to get the right investor for your start-up
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Posted: Thu 13th Feb 2025
When it comes to funding your business, it’s easy to waste time pitching to the wrong people. The trick? Knowing who to approach and when.
Different investors focus on backing businesses at different stages. Whether you’re testing an idea, refining your product, or scaling up, there’s a funding option that fits. Here’s a guide to grants, equity and debt – and when to use them.
Idea stage: Turning a lightbulb moment into reality
At this stage, you’re proving your concept and building an MVP (minimum viable product). Investors want to see early progress and signs of success before they come on board. So, where does the money come from?
Founder funding: Putting your own money in shows belief and skin in the game – good signals to future investors
Friends and family: Often the first to back you. They already know you – your skills, commitment and passion – so they may be more willing than people who don’t know you to back you. Keep things professional with agreements to avoid family BBQ drama later
Grant funding: Grants offer free money from government bodies and charities – no debt, no equity lost. However, grants are allocated for very specific purposes so be sure to check you match the criteria before applying
Accelerators: Provide funding, mentorship and resources – sometimes in exchange for a small slice of equity. Perfect for refining your idea quickly
Your job? Prove your idea has legs.
Got an MVP but no paying customers yet?
You’ve got a product, but no one’s paid for it yet. Investors need proof of demand. Tread carefully:
Founder funding and friends and family: People who trust you are still your go-to supporters
SEIS angel investors: Under the UK’s Seed Enterprise Investment Scheme (SEIS), investors get tax breaks for backing early-stage businesses but these angel investors will expect you to have a clear plan for growth
Reward-based crowdfunding: Platforms like Kickstarter help you validate demand and raise funds through pre-orders. There is nothing like orders to signal you’re onto something
Grants: Still an option if your idea is innovative or solves a social problem
This is the time to test, gather feedback and refine your product.
Early stage: Proving product-market fit
You’ve got your first paying customers, and you’re inching closer to product-market fit – when people want your product and pay for it. This is when investors start to take notice:
SEIS angel investors: Still great for small cash injections
Angel networks and syndicates: Beyond SEIS, experienced angels may invest larger amounts, or invest alongside others and offer expertise as well as their cash
Start Up Loans: Government-backed loans with manageable rates for early businesses
SEIS funds: Funds pool investor money so they can back multiple SEIS-eligible start-ups. You will need to show you have a clear plan for growth and you will also want to check the terms of the investment. These investors will often provide more investment down the line, as you grow, so they can be good strategic partners
Focus on proving consistent demand and building systems to scale.
Growth stage: Ready to scale
You’ve got a solid customer base – time to grow. Funding options expand, but so do investor expectations:
Angel investors: Angels may provide follow-on funding as you scale.
EIS funds: Like SEIS but for later-stage businesses, offering tax relief to attract investors
Venture capital (VC): VCs look for businesses with high growth potential. If your numbers impress and your plan for further growth is clear, they might well write a cheque
Bank loans and alternative finance: As your risk reduces, lenders become more willing to back growing businesses
Scale efficiently and show growth is sustainable.
Established business: The big leagues
If you’re profitable and established – congratulations! Now you can consider:
Bank loans: Straightforward, cost-effective funding with your proven track record
IPO: Ready to go public? An initial public offering (IPO) lets you raise significant capital by selling shares on a market like the FTSE 100
Final word: The right funding at the right time
Navigating the funding landscape can feel overwhelming, but the key is knowing what suits your business stage and your growth ambition. Prepare your business plan, develop a clear financial forecast and start with those most likely to say yes – friends, family, angels, so you spend less time chasing dead ends and more time building your business.
Ready to take action?
Join Focused For Business’s Funding Strategy Workshop to develop a clear plan for raising equity investment.
With the right funding strategy, you’ll keep moving forward, turning your start-up dream into a thriving success.
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