You have 4 options to choose from. Do not get it wrong!
Angel investors are individuals who invest their own money into early stage startups. Angels often join forces with other Angels and invest as a syndicat. This category is becoming more and more educated and the average ticket size is growing fast.
When you’re looking for a venture investor it can sometimes feel like it’s just about the money and that ‘any investor will do’. However not all angel investors are equal. If the individual doesn’t share your vision for the company and is too rigid with your business plan, it can result in extra pressure for you and your team.
This investment is only the first step of your funding journey. Each step should help you get to the next round. And an industry insight or a key contact can sometimes help you alot more than a simple cash injection.
Make sure you are aligned with your Angels.
This category offers a good structure to help early stage startups grow in the best possible environment. Accelerators and incubators can invest money but they can also invest time with advisors, demo days and networking. It’s also a great place to meet other founders trying to do the same as you.
Several accelerators are sponsored by large organisations (Barclays, Telefonica, John Lewis). These corporates are trying to reinforce a culture of innovation within their teams and it can be great to test your B2B products or to set up important partnerships. Direct acquisitions or acquihires have also been seen even before demo day.
There have been some great success stories in this category. The most famous accelerator is Y Combinator in the US which has helped launch Airbnb, Doordash, Stripe, Dropbox.
As seed rounds become bigger and require more proof of traction and product-market fit, a gap has been left for very early stage investors. This is for entrepreneurs who have an idea in an exciting market and are exploring things.
A pre-seed VC will invest in ranges between 100K-500K. At this level of investment, it’s generally all about founders, market size and experiments. A Pre-seed fund will make you a part of an ecosystem from the start with investors and startups ready for your next steps. Although they are not generally as hands on as an accelerator or incubator, they can provide quality intros and have standard templates for term sheets.
If you add a Pre-seed VC to love money and business angel investments and you could have the perfect combo.
Seed venture capital was named “seed” because it was supposed to be the beginning of your startup funding adventure. However today seed rounds are often closer to £1M-£3M and we are seeing more and more startups grouping their previous investments together to show a larger seed round and hopefully get more PR.
Seed rounds structures can vary but generally we see one lead venture fund that will be in charge of negotiating the term sheet and a series of secondary investors that are happy to come on board for the ride. That lead investor is key.
Discover the 4 main options to raise early stage venture capital for your business in the UK.
Venture capital explained in a glossary type article with all the jargon in plain english.