Raising investment is not for the faint-hearted. It’s a difficult process that requires a lot of planning and preparation.
Did you know that according to Startups.co.uk, UK investors scaled back their investments overall in 2023? Since then, we’ve seen a slow incline in investors offering new growth prospects, but the world of investment still feels uncertain.
It’s important that when you reach the all important investment stage, you are well-prepared and equipped to secure funding for your business. We’ve put together a quick guide on how you can go about securing funding as a product-based business.
How to prepare to raise investment
Before approaching any investors, you’ll need a great pitch deck to back your idea.
We’ve been running a campaign with serial angel investor Sam Simpson, who’s offered to give honest feedback on your pitch decks and advice on improving them. You can watch Sam’s pitch deck reviews below and learn a little more about what makes investors tick.
Sam Simpson reviews dating app, hati.
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Sap Simpson reviews crypto exchange company, Mabuhay.
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Learn from The Pitch alumni
One of the best ways you can learn about pitching is watching how startups who have already been successful pitched their business. Here are some great product-based startups making their case for investment:
Shroot
Shroot offers letterbox-friendly, plant-based gifts and kits that are simple to use and put together with sustainability in mind.
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Three Robins
Three Robins are on a mission to provide all the fuel that families need for life’s adventures. Their plant-based alternative milk is filled with natural goodness to reassure parents that switching to plant-based doesn’t mean missing out.
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Fodilicious
Fodilicious make IBS- and gut-friendly snacks. Their products are free from the top 14 allergens and hand-baked in their dedicated allergen free bakery so that customers can eat with confidence.
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What do investors look for in a startup?
Try to gather as much knowledge as possible about what investors will be looking for when putting your investment pitch together.
We spoke with Praetura’s Ben Davies and Jessica Jackson on what they personally look for in startup investment proposals. Watch the full video below.
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Now that we’ve covered what investors are looking for in a startup, let’s dive deeper on what they’re on the lookout for in product-based or retail startups.
Validate your concept: You’ll need to sell your product to the investors. A good way to do this is to demonstrate that your business has achieved recognition. Whether that’s a collection of testimonials, industry recognition or even your sales traction. This will all help secure investor interest.
Know your numbers: Serious investors will probe you on profit margins, pricing structure and scalability to determine if there’s any ROI (Return on investment). Be ready to answer questions to secure investment.
Tell your story: Investors will be interested to see how your product is different from the competition and other market alternatives. To pique their interest you’ll really need to sell your product and telling a story can help do that.
How can you raise investment as a product-based business?
There’s a few different options out there when it comes to choosing how you’ll raise investment:
1.Angel investors
An angel investor is someone who will invest in your startup in exchange for a minority stake in your business. According to British Business Bank, angel investors will invest anywhere from £5,000 to £500,000 in a business.
Usually, an angel investor will be an entrepreneur with years of experience in business and investing, so in addition to financial backing, they can offer mentoring and business advice.
Think this could be the funding stream for you? Check out our article How to prepare a pitch for angel investors.
2.Venture Capital
Venture Capital allows a startup business to offer a large share of their company to an investor or a few investors in exchange for funding, mentorship or talent.
There’s a few different options that come under the VC (Venture Capital) investment umbrella.
Pre-seed funding/ pre-seed capital: This is the earliest stage of startup funding. Typically, startups raise pre-seed funding to hit the ground running and develop their idea to head into market.
Seed funding: Usually the first official funding round, when the company sells shares to outside investors in exchange for equity. We have a handy guide on this topic, check it out here.
Early-stage funding: At this stage, funding comes from angel investors, friends and family members, and the original company founders.
3.Crowdfunding
Crowdfunding is a great way of raising investment for your startup. Crowdfunding requires you to set up a campaign that asks for financial support from a large number of people. You’ll need to set a goal to reach and ask individuals to donate small amounts of money to help you reach that goal.
Thinking of crowdfunding but not sure where to begin? Here’s some handy resources to help you get started:
- What makes a successful Crowdcube campaign?
- Video series: Introduction to crowdfunding
- Crowdfunding for seed-stage businesses
- An introduction to equity crowdfunding
4.Government schemes
There’s a lot of government support available to startups and small businesses across the UK.
Check out our article Updated guide for 2024: Government support for small businesses to learn more about the options available to you.
What’s the best way of raising investment for a product-based business?
As there’s so many options available, it’s easy to become muddled between all the choices. Ultimately, you should do what feels right to you and your business. You could opt for any of the funding options we listed above but you might want to test your product before asking for investment.
If you’re looking to gain some first-hand experience and want to test selling your product, you could benefit from submitting your application to our competition to pop up with Tide.
We’re working with Tide to bring retail and product based startups across the UK the opportunity to win a £5,000 cash grant to spend on their business and a spot at one of Tide’s pop up locations for a chance to test their products. Check out the full competition details here.
