Editorial & Advertiser Disclosure Global Banking And Finance Review is an independent publisher which offers News, information, Analysis, Opinion, Press Releases, Reviews, Research reports covering various economies, industries, products, services and companies. The content available on globalbankingandfinance.com is sourced by a mixture of different methods which is not limited to content produced and supplied by various staff writers, journalists, freelancers, individuals, organizations, companies, PR agencies Sponsored Posts etc. The information available on this website is purely for educational and informational purposes only. We cannot guarantee the accuracy or applicability of any of the information provided at globalbankingandfinance.com with respect to your individual or personal circumstances. Please seek professional advice from a qualified professional before making any financial decisions. Globalbankingandfinance.com also links to various third party websites and we cannot guarantee the accuracy or applicability of the information provided by third party websites. Links from various articles on our site to third party websites are a mixture of non-sponsored links and sponsored links. Only a very small fraction of the links which point to external websites are affiliate links. Some of the links which you may click on our website may link to various products and services from our partners who may compensate us if you buy a service or product or fill a form or install an app. This will not incur additional cost to you. A very few articles on our website are sponsored posts or paid advertorials. These are marked as sponsored posts at the bottom of each post. For avoidance of any doubts and to make it easier for you to differentiate sponsored or non-sponsored articles or links, you may consider all articles on our site or all links to external websites as sponsored . Please note that some of the services or products which we talk about carry a high level of risk and may not be suitable for everyone. These may be complex services or products and we request the readers to consider this purely from an educational standpoint. The information provided on this website is general in nature. Global Banking & Finance Review expressly disclaims any liability without any limitation which may arise directly or indirectly from the use of such information.

How to secure the right type of investment for your startup

Salvatore Minetti, CEO and founder, Prospex.ai

The startup sector in the UK is thriving. Last year alone, 589,000 new businesses were launched – 22% more than in 2012. In total, over the past five years approximately 3.5 million new companies were founded across the country.

Entrepreneurs thereby face a wealth of opportunities, particularly in light of the strong financial support readily available to help nurture and grow early stage businesses. And this vital capital can be found in many forms – from private sectors investment like debt finance and equity finance, to public sector initiatives like the Seed Enterprise Investment Scheme (SEIS).

With a plethora of options available to entrepreneurs looking to secure finance for their fledgling company, deciding how to raise investment and which form of finance is the best fit for their business can be a challenging task.

There are a number of key lessons that entrepreneurs should keep in mind when raising investment for their startup. As the CEO and Co-Founder of Prospex – a company that has just launched their second crowdfunding round on Syndicate Room– I have become well versed in the trials and tribulations of securing the capital needed to successful grow a business.

Salvatore Minetti
Salvatore Minetti

 Debt finance vs. Equity finance

Most private lending can be characterised as either equity or debt investment. While both can be effective avenues of growth capital, there are important differences that business owners need to be aware of.

With debt finance, investment comes in the form of loans which are repaid with interest over time. Unlike equity investment, debt investors do not get equity in the deal or hold a stake in your business. This finance option is typically best suited to more mature businesses with a healthy and consistent turnover that enables them to repay the upfront investment made by the individual, group or company.

Meanwhile, equity finance involves selling a stake in the business to investors, giving these investors – whether they are high-net-worths (HNWs), VCs investors or private equity firms – some control over your company and a share of the overall profits.

Some entrepreneurs may opt for debt investments as it enables them to raise the necessary capital without yielding a share of their business. However, a lack of stable, sizeable revenues can prevent fledgling companies from acquiring this form of investment.

The added benefits of mentorship and advice that often comes with equity investment should also not be overlooked when deciding which form of finance is right for your company. Holding a stake in your business, investors are often more willing to offer their expertise and industry connections– which can prove to be a major advantage for young companies during the early growth stages.

Taking advantage of government-backed initiatives

Government-backed schemes are also a promising option for entrepreneurs seeking investment for their startup. The Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS) are two alternative options that can give fledgling companies much-needed access to growth capital.

Since 1993, the EIS initiatives have contributed £1.8 billion worth of investment into 3,470 UK SMEs in 2016-17. Through this model, Investors are given tax breaks in return for backing scaling companies, encouraging private investment into early stage businesses and supporting entrepreneurship across the country.

 How much money should you raise?

Once you have decided which investment route is best suited for your business, the question remains – how much money do you actually need to raise?

There is an underlying pressure on entrepreneurs to secure as much money as possiblein order for their business to be taken seriously. However, more isn’t necessarily better. Instead, a more focused approach based on specified goals may in fact be more effective and encourage a business to grow to its potential.

Setting out clear targets before launching a funding campaign will establish exactly how much external investment is required to meet your business milestones. In a climate where investors are constantly on the lookout for innovative startups to support, there are massive opportunities for entrepreneurs looking to develop and grow a successful business. Taking the time to consider all the investment opportunities available and decide exactly how much money is needed to achieve your business goals istherefore crucial for overseeing a successful funding campaign that will fuel long-term growth.

Salvatore Minetti is the CEO/Founder of Lomi Artificial Intelligence. Prospex.ai, Sales Leads Intelligently, is their first product. He is also a Portfolio Non-Executive Director for numerous technology companies.