It seems we often hear conflicting statements. The UK is a hub of bustling tech ideas, innovations and scaleups swimming in record investment; the Scaleup Index 2022 revealed that in 2021 alone scaleups received £8.8bn in equity investment. This was, in many ways, a record year.
Yet, despite the number of scaleups growing, the proportion of equity investment for scaleups actually peaked in 2017 (50.2%). Deal numbers have been on a downward trajectory since. Throw in a post-2021 world juggling cost-of-living surges, inflation and instability and the picture looks a bit different. It’ll be interesting to see the results of the next report with 2022 data.
Now letters are being written to the Prime Minister to increase scaleup investment availability for science and technology companies and opinions voiced that government Silicon Valley plans are out of touch. The desire to start a new business is very much there and happening. Sustaining it represents a trickier obstacle to navigate.
Either way, overall growth seems to continue and the appetite is there. What’s more imperative now is that investors see you, buy into your vision, and trust you. A brilliant idea and product is of course necessary. But so many scaleups have these.
To scale successfully, it’s all in the execution. It’s about identifying the share-of-voice gaps, how you position yourself to the market, and picking the optimum moment to go for funding.
But where to start?
Know your vision and how you can get there
The key ingredient here is confidence. Before even looking for potential investors, you have to be sure of yourself. You created your business and product because there was a need for it. If anything, that need may have increased. With your business plan, it’s imperative to showcase what makes you unique, your ethos and outline where you see the company going.
This roadmap will be followed by due diligence. With this, from your management to business model, you need to show profitability and convey assurance. Again, it’s all about telling your story, demonstrating how the need meets market demand and how this is converted into value. It helps to be operating in a sector that is currently experiencing high growth. After all, it’s high-growth opportunities they’re looking for.
It’s easy to think about what you want to say about your company. But really, scaleups need to think about their offering with an investor and media filter placed over their ideas: what does your product mean to fellow companies and what is the scale of the issue it’s solving? To answer this effectively, it’s helpful to find ways of breaking out of tunnel vision.
Know the organisations that will help you
External support is everything, so make sure you are connected to the relevant tech and accelerator hubs. But where do you find such help?
News broke at the end of last month that Tech Nation, a champion of the UK scaleup industry that has helped the likes of Monzo and Deliveroo, had been forced to close down after losing government funding. This has sent ripples through the scaleup scene.
Its replacement for the Digital Growth Grant, Barclays Eagle Labs, perhaps represents an obvious starting place to leverage support, alongside organisations like the ScaleUp Institute. Through such hubs, you can connect to some of the biggest players in the game, receive mentorship and gain an understanding of the role of equity investments and the current market.
This research is insightful. Being in tune with your market and being able to show your value within it should be second nature, helping to adapt your product and story in line with trends. This helps exemplify both your long-term growth potential and management skills to investors.
The changing of the guard here from TechNation to Barclays simply enhances the need to develop your own network of funding insight.
Build your network
Through knowing the organisations that will help you, you can then begin to build your network. AltoVita’s co-founder Vivi Himmel recently discussed how this process is fundamental to fundraising, highlighting that “it’s important to really line up your believers, not just one or two but hundreds of them. They will be the ones creating the snowball effect”. When it came to securing AltoVita VC funding, the co-founders identified 259 prospects.
Building a strong network needs to be joined by building strong relationships. So, don’t force anything. Let it happen organically and effectively, working smartly rather than impatiently. A few gems of advice and valuable connections are better than draining your energy on unhelpful leads.
You will now have an interconnected hub of knowledge and experience from people who have gone through the same process. Take advantage of this hub, discovering how others went about raising funds and testing the waters for what investors might be after. With this developed, it’s then a case of approaching funding prospects.
Time it to perfection
It’s true, it will be harder to succeed in the current climate; investors will be more careful and more strategic. Yet opportunity also flourishes in such environments. Timing is key, and this doesn’t necessarily mean waiting for positive economic conditions.
The UK is expected to be the only major economy to shrink in 2023 yet the recession is also projected to be shorter and less severe. And the latest prediction is that we’re likely to avoid a recession altogether. With such a mixed bag, you often have to take projections with a pinch of salt, but investors may see this as an opportunity to invest before market winds change direction to their benefit.
You need to go for funding when the conditions for yourself, the business and its market are primed for success. The nature of VC funding allows for riskier investments. By firmly establishing your identity and offering, harnessing the right support and wisely building and using your network, you can develop a blueprint that places investor confidence in you above all else.
Leah Jones, Deputy Managing Director at CommsCo
This article is part of a partnership with The CommsCo. For partnering opportunities, contact [email protected].
