The term equity finance refers to share capital that is invested into a business for the medium to long term in return for a share of the ownership and in many cases an element of control over the running of the business. There are two main forms of equity finance available to businesses. These are business angels and venture capitalists. Equity finance is fast becoming one of the most popular ways of gaining start up finance for businesses.
Equity finance is the perfect example of true risk capital. This is because there is no guarantee that your investor will ever get there money back. Unlike lenders equity finance investors don’t normally have the rights to interest or to be repaid at a particular date. The way in which equity investors regain the money that they have invested into a company is through taking a share of the business and a percentage of the profit. It is because of this high risk involved in equity finance that if your business can not support growth rates of at least 20% you may not be able to attract equity funding. Equity investors are more likely to invest in someone they feel they can trust with a clear business plan and strategy.
As a business you need a clear business plan and strategy regardless of what type of business start up finance you are hoping to attract. You need a comprehensive business plan with a detailed marketing plan and your financial forecast. Your business plan needs to address issues such as how much funding you are going to need and how much control you are hoping to retain over your business. You also need to clearly state what you are using your business start up finance for as well as if your plans are realistic and if your venture is appropriate for outside funding. Whilst you are completing your business plan you also need to consider what potential investors may be concerned about. Without all of this; plus much more no potential investor will go near your business, planning is key if you are hoping to secure external funding.
If you are hoping to gain the financial help of an equity investor there are several questions that you need to keep in mind such as are you prepared to give up some of the shares within your business as well as part of the control over your business? Investors will expect to have some say in the way in which your business is run so you should be prepared for this. You also need to be confident in your business and the products and services that your business has to offer, one way in which you can do this is by identifying what your businesses unique selling point is. As well as this you also need to have the necessary industry skills and experience to drive your business.
For more information about what equity finance can do for your business get in touch with a business angel or venture capitalist today and they will advise you on what to do next.
By: Helen Cox
Posts Tagged ‘Venture Capitalists’
Types of Business Finance – Grant Finance
December 20th, 2009
Whether your business is small and new or large and established you will need adequate finance for the majority of projects, purchases and expansions you’re your business makes.
Obtaining the necessary cash to get your business off the ground can be a challenge and few new companies are able to finance themselves on cashflow alone and therefore need to consider gaining finance from other external sources. There are many of these external sources who will be willing to provide you with this start up finance, a few examples of these are stated below:
• Bank loans
• Business angels
• Venture capitalists
• Overdrafts
• Credit cards
• Friends and family
These are just a few examples of some of the places that business start-up finance is available from; however there is another source of business finance available that many people often seem to forget, this is grant finance. Business Grants can however take several months to process so you should always add extra time to your planning so that you get a decision on your grant application before the project is due to start.
A lot of start up companies and small businesses are often put off the idea of applying for a business grant to help them with their finances and because of this many of these businesses are missing out on a great opportunity to gain extra cash for there business; cash that doesn’t need to be paid back.
Few, if any new companies can finance themselves on cashflow alone and therefore need to consider raising finance from other external sources. If your business needs extra cashflow for a specific project or purpose then a business grant could be exactly what you need. This is because business grants are only awarded for specific aspects. So what exactly is a business grant? A business grant is when an organisation or authority gives a sum of money to your business to help you succeed in a particular project these business grants are mainly awarded by the Government at both a local and national level as well as by smaller bodies such as The Princes Trust or The Arts Council.
When you are applying for a business grant there are certain things that you should keep in mind such as a detailed description of the project, an explanation of the potential benefits of the project, a detailed work plan, details of your own experience and if possible a business plan. All of these will help you with your application process and help you to get closer to that business grant that you want.
If you are successful in your grant application the money that you receive is none repayable and you won’t have to pay any interest for it either; however you will need to carry out a significant amount of hard work if you want to stand a chance of obtaining a grant. These grants are also limited so the competition that you will face for them is intense.
By: Helen Cox
UK Finance from Venture Capitalists
October 30th, 2009
Any new startup would require proper funding and without that it is difficult to be successful in their business venture. Choosing your UK finance partner is an important step in setting up your business. The venture capital firm should be able to understand your business clearly and provide proper funding at the right time to make you successful. Hence it is important to select to UK finance partner.
For startups and new companies in the life science biomedical companies there is a venture capital firm called Abingworth. They specialize in funding biomedical companies. They understand the biomedical industry clearly and have experience in funding such startups. They need to maintain a close relationship with the management of the startup to make them successful. You can approach Abingworth if you are looking for UK finance for biomedical startups or new companies in that field. They fund companies that develop products and also which work on specific ailment areas.
Finance in UK is provided by venture capitalist firms only if they are interested in the area of business that they are funding. The potential for commercial success should be prominent. Most of the companies look at the management which is running the company. The main criteria for them should be a strong management and the idea of business should be novel. You business could also be the current technology but they look at how different you are going to do it. Your approach has to be different to be successful commercially. Some of the UK finance firms also help you to get the right management team in place.
There are very few venture capital firms that fund the early stage technology in UK. Finance for such new start ups are difficult to get if you are not approaching the right kind of venture capitalist firm. ‘Pond Venture Partners’ is one such company that funds the early stage start ups. If you feel that you business is not growing then you have to approach companies like this in UK for finance. They have vast experience in funding the technology startups and they know the difficulties that the start ups face. They even help you write your business plan and build your team if you have the right kind of idea that would click globally. If your business has the potential to make an impact globally then you can approach Pond venture partners right away for finance in UK.
To get your funding you may not know which venture capital firm to approach. This is the case for most of the start ups. They may not know who will provide them finance in UK. Under such circumstances it is better to approach a Venture Catalyst who will help you to be in touch with the right kind of venture capitalist. Companies like Sturgeon Ventures provide such venture catalyst services. They help you to get in touch with the right kind of VC firms and they also help you throughout your business. They do not provide you the necessary capital but they help you to link with those who might be interested to fund your venture.
By: Jeff Lakie
