Attracting funding and the process of investment

We have already covered the types of funding available to you to support the needs of a growing business. Now, we turn to the investors and ask for their top tips for those seeking funding.

Neil Inskip is an investor at British Growth Fund (BGF), the UK and Ireland’s most active investor in growing businesses. He shares 5 areas for business owners to consider when looking for growth capital:

1. Do you have a clear plan?

Clearly articulate what you do and how you do it. You live and breathe what you do but remember that your potential investor is unlikely to have the same depth of knowledge of your industry. Your plan is your chance to demonstrate where the growth potential is and what the opportunity is for an investor. It also helps if you can include how you have already delivered against existing plans with financial performance to demonstrate a reliable track record.

2. Have you got the right people around you?

We back quality management teams because we only ever take a minority stake in a business, which leaves the owner in control and management running the business, so it’s crucial to us that we believe in the strength of the team.

As a business scales, good founders need to surround themselves with smart people to work across various functions. Reflecting on your own strengths and weaknesses as a founder and team can help to identify any talent gaps in your existing support system. A non-executive director can add value in many ways and support through an investment process and beyond. By taking a truly independent view, non-execs bring real-world experience and should challenge the business owners to deliver the best results for all stakeholders.

3. How will you achieve growth?

Demonstrate a clear understanding of the marketplace and the need which you are addressing. We find an opportunity compelling when a business owner knows their audiences and is crystal clear about why their product or service is better than the competition – or is offering a genuine innovation within their market. Your growth may come from entering new markets, investing in innovation, expanding geographically or acquiring complementary businesses.

4. What obstacles might your business face?

Balance ambition with reality. We back ambitious business owners going for growth, but projections need to be grounded in reality.

It is well worth considering what external factors could be a threat to delivering your growth plan. It can help to demonstrate some scenario planning which take these into account and act as reassurance to an investor.

5. Do you think that you will get along?

Perhaps the most important consideration of all is whether you can get along with your investor and create a partnership to take your business to the next level. A cultural fit is essential, as beyond investment you’ll have shared interests and goals. To what extent depends on the type of investment but at BGF, we take a minority stake in businesses, allowing the founder and management to run the business day-to-day. Therefore, having a mutual trust and understanding is vital. We invest for the long-term, offering advice and support to help the business succeed against its goals.

About BGF

• BGF was set up in 2011 and has invested more than £2bn in over 285 companies, making it the most active investor in the UK and globally by number of transactions.

• BGF has £2.5bn to invest in UK SMEs and in Ireland, and an additional €250m to support Irish businesses. Earlier this year, Canada launched its equivalent – the Canadian Business Growth Fund – based on BGF’s funding model, and Australia is now actively exploring the approach as well.
• BGF is a minority, non-controlling equity partner with a patient outlook on investments, based on shared long-term goals with the management teams it backs.