Whatever stage your business is at, you may be looking for investment to start, grow, or diversify.
According to Simply Business’s SME Insights Report, over half (57 per cent) of businesses are seeking some form of investment or additional finance.
Read on to find out more about the different types of business investment and how you can find investors for your business.
How does business investment work?
What are the different types of small business investors?
How much investment are SMEs trying to raise?
3 ways to find investors for a business
What can a business investor help with?
How does business investment work?
There are different ways that businesses can raise funding, these are known as private equity, debt, and reinvestment.
Private equity is when an investor or groups of investors gives you a cash injection for a stake of your business. For example, a group of investors could give you £100,000 to help you buy new equipment in exchange for 20 per cent of your business. Private equity investors are also often able to help with business consultancy and connections.
Debt funding usually comes in the form of a business loan. This means you’ll have to pay the money back over a period of time, and may have to pay interest. A business loan could be secured against your finances or an asset such as your premises. To get this type of funding, you’ll need to be able to make a clear case for how it’s going to be used and how you plan to pay it back.
Reinvestment is putting the profits you make back into your business. The benefit of taking this approach is that you won’t have to give away any stake in the business, nor will you have any debt or interest to pay back.
What are the different types of small business investors?
When it comes to private equity investment, there are several options. Which one is suitable for you will depend on what stage your business is in and how much you’re looking to raise.
Our SME Insights survey found that 12 per cent of small businesses are looking for crowdfunding, 10 per cent are seeking venture capital investment, and nine per cent are looking to receive angel investment.
What are the key differences between these types of private equity investment?
Angel investment
An angel investor, also known as a business angel, is an individual (or group of investors) who’s looking to identify and invest in businesses with high growth potential.
Angel investors will usually be looking to invest up to £500,000 in startups in exchange for a stake in the business.
Read our guide to angel investment for more information.
Venture capital
Venture capital (VC) funds are made up of investors and business experts. Venture capital firms raise money from private and institutional investors to invest in select companies.
VC funds are more likely to target established businesses and can offer larger sums of money.
Read our guide to venture capital for more information.
Crowdfunding
Crowdfunding is a type of investment where a large number of people contribute smaller stakes in your business through an online platform.
Anyone can invest through crowdfunding sites and businesses can use different methods to raise money, such as giving away a stake in the business, loaning money at a set interest rate, or giving away rewards in exchange for cash.
Read our guide to crowdfunding for more information.
How much investment are SMEs trying to raise?
Our SME Insights data shows that a third (33 per cent) of businesses seeking investment are trying to raise up to £20,000, while a quarter (25 per cent) are trying to raise between £50,000 and £100,000.
Speaking to bigger businesses with more than 10 employees, we found that over a fifth (22 per cent) said a cash injection of £50,000 to £55,000 would take their business to the next level.
Over one in ten (11 per cent) said they’d need £80,000 to £85,000 to get to the next level, while 12 per cent said they’d be looking for £95,000 to £100,000.
3 ways to find investors for a business
You’ve reached the point where you think your business could benefit from some investment, but how do you get your business and ideas in front of the right people?
First off, you can speak to other business owners in a similar position – they may have had investment or know some angel investors or venture capitalists.
It’s also important to be an active networker. Attending in-person and online events can help you get in touch with the right people. As well as attending events specifically themed around investment, it could be worth going to general business events as you never know who you might meet.
Another thing to consider is your personal brand. Posting thought leadership content regularly on platforms like LinkedIn can help to make you more appealing to investors. On top of this, speaking and presenting opportunities at events can help to increase your profile and the chances of getting noticed by investors.
When you start speaking to the right people, you’ll need to make sure you have a solid vision of where your business is going and exactly what you’d do with any investment. You may need to create a business plan for investors – download our free business plan template to get started.
What can a business investor help with?
Investors in a small business can not only help you by providing a cash injection, but they can also offer valuable advice and contacts.
Here are five things investors can help with (on top of money):
experience – successful investors are likely to have been businesspeople for many years. Their experience of helping businesses to grow could help to get you on the right track
contacts – sometimes it’s not what you know, but who you know. An investor could be able to put you in touch with a supplier or partner that could take your business to the next level
profile – an investor who’s a thought leader could help to get your business seen by more people, both across social platforms and in traditional media
business expertise – alongside their experience, a good investor is likely to be able to offer business advice on key decisions. Having a sounding board who is one step removed from the business can be hugely beneficial for founders
vision and strategy – it can sometimes be easy for small business owners to focus on the present. An investor could help you to develop your strategy and future plans, increasing your chances of growing your business to its fullest potential
Watch: How to get investment for your small business
Three female founders, including Harpreet Kaur, winner of The Apprentice in 2022, share tips for finding investors and funding for your small business.
The panel discussion was recorded as part of Simply Business’s Empowering Women in Business live event.
What are your tips for getting investment for a small business? Let us know in the comments below.
More small business finance guides
What is zero-based budgeting – and can it save your business money?
How to value a business: 7 strategies you can try
Cash basis vs accrual accounting – what’s the difference?
What is business insurance?
Ready to set up your cover?
As one of the UK's biggest business insurance providers, we specialise in public liability insurance and protect more trades than anybody else. Why not take a look now and build a quick, tailored quote?
Start your quote
