Startup investors: who, what and where to find them

Last updated: 04 November 2024. 

So, you’re searching for ways to fund your startup. Before you do anything, you need clarity on what you intend to do with the funds when they flood in.

How much will you allocate to product development or marketing or recruitment for instance? These are the questions you need to find the answers to.

Secondly, is it the right time? Understanding where you are in your journey will help you find the investor you need now.

Before we list the different types of startup investors and how to find them, let's a look at a 'typical' business journey so you can see where your business sits.

A typical business lifecycle

You'll find many variations of this online but broadly speaking, a successful business will enter three to four stages. And within those stages, encounter different kinds of funding:

Launch

• Pre-seed
• Seed

The clue is in the name; pre-seed is the very start of the journey. Pre-idea, pre-production, pre-revenue. Seed is post-revenue when the business is starting to make money.

Growth

• Series A
• Series B

Series A typically refers to the point at which a company matures out of seed funding and is looking to expand. Series B funding rounds are usually about bringing more specialists into the fold. 

Maturity

• Series C, D, E etc.

A mature business is an established business with a loyal client/customer base and competitors. Growth is no longer exponential but steady.

Series C funding is often about buying out the competition to de-risk the business model, ahead of it being sold or floated on the stock market.

Decline

All good things come to an end. Inevitably, revenue starts to decline. That's when it's time for a tasty exit, like a merger or acquisition, or a new strategy to diversify the business.

So those are the key stages, milestones and investment rounds. Not every business follows the same path, and experts' interpretations of the different funding rounds and stages vary, so take it all with a pinch of salt. 

Startup investors: Who are they? And where do I find them?

Once you’ve established what you intend to do with the funds you receive and the stage your business is at, it’s time to look into your options for startup funding.

There are lots of ways to raise funds, all worth looking into, like non-repayable business grants, for instance (free money).

From family and friends pre-seed funding, to working with venture capital firms (VCs), there are countless ways for you to secure the capital you need to grow.

But to avoid going down the rabbit hole, let's focus on the most sought-after investors and where to find them:

• Family and friends
• Incubators
• Accelerators
• Angels
• Crowdfunding
• Venture Capitalists

Family and friends

Sometimes, a founder’s friends and family can fund a startup in the early stages (pre-seed). If they choose to chip in, generally speaking, it's a micro to medium-sized investment intended to help get the business off the ground. 

This funding round isn’t just business, it’s personal. So if you choose to go down this route, tread wisely and ensure that everyone knows the risks involved; it’s said that 90% of startups fail.

Incubator

An incubator is an organisation that helps entrepreneurs nurture their business idea and refine it. Unsurprisingly, that’s in the early stages, pre-seed. Sometimes, that’s before there’s even a team toiling away. 

Some but not all incubators provide cash and non-cash resources, like a co-working space, for instance. Not all incubators are independent organisations; some are government-backed or run by angels or VC firms (we’ll come to those later). 

Accelerator

Very similar to an incubator, an accelerator is for pre-seed to seed companies with a minimum viable product hoping to scale more rapidly. Like an incubator, accelerator programmes typically last between two to 12 months.

One of the drawbacks of incubators and accelerators is that they are quite selective and not always accessible to everyone. Often specialising in a specific industry and only willing to take on startups in that sector. 

With many, there’s a cost, a rigorous application process and high competition. For instance, Y Combinator, a popular accelerator, accepts only 2% of the applications it receives. Others only accept referrals via partners. 

Location is a factor to consider too. An incubator may require all startups they support on-site. But an accelerator or an incubator could still be right for you. You'll find some of London's best in the Founder Institute’s list.

Angels

An angel investor is a private individual who provides capital usually in exchange for a sizeable chunk of equity. Generally speaking, they're pre-seed investors.

Angels use their own money and often act as mentors, not just investors. Drawing on their years of experience, an angel is usually aware of the risk that’s involved but a passionate advocate nonetheless.

Typically, they invest a small to moderate sum, often in the tens of thousands but rarely more than half a million pounds. Angels are considered a step up (financially) from the friends and family round. But they don't usually have as deep pockets as a VC.

There are approximately 300,000 angel investors in Europe funding founders’ dreams. Almost 20,000 of those are members of Business Angel networks. So that’s a great place to start.

Check out The Entrepreneur Handbook’s list of the top 10 angel investment networks in the UK.

And never underestimate the power of social media; angels are people, after all. Follow @AngelList on Twitter with help on how to find angel investors you think could be right for you. Then connect via Twitter or reach out to them on Linkedin.

Crowdfunding

Crowdfunding is when a startup raises funds by asking the general public. If enough people are on board and each person invests even a micro amount, that can amount to a significant sum; enough to kick-start a business. 

By pitching to the public, a business can build brand awareness (and loyalty) early on. And their feedback could be invaluable. With that in mind, crowdfunding works best for seed-stage startups developing a product.

Online crowdfunding platforms make it all possible. Here's a list of some popular crowdfunding platforms: 

• Seedrs 
• CrowdCube 
• BnkToTheFuture 
• Kickstarter
• iFundWomen
• Indiegogo
• Crowdfunder

Every platform is slightly different. In the case of Kickstarter, an investor will receive some kind of reward or incentive. Whereas Seedrs helps startups raise seed or angel investment in exchange for tiny amounts of equity.

The fees for using such platforms can be quite high. And, to be marketed at all, most platforms will want to see a percentage of your investment already raised.

VCs

Last but not least, venture capitalists. A VC is a private equity investor that founders tend to turn to as the company grows and matures. Generally speaking, Series A, B and C are VC territory. 

The greater the growth potential, the more likely a VC will invest a sizeable chunk of money. In exchange, of course, for a significant share in the business. Naturally, that can impact decision-making, agreed milestones and timelines.

Like angels, VCs can be a real asset to the business in terms of the experience, market insight and network they provide. Some VCs are lone rangers, but many work on behalf of established venture capital firms with big names under their belt. And reputation can go a long way. 

Like angels, Twitter and LinkedIn are useful resources for tracking down individual VCs. Sifted put together a list of 29 VCs to follow on Twitter. As for venture capital firms, London is full of them. Take a look at Beauhurst’s list.

Once you’ve found your VC, it’s crucial that you nail your outreach and your pitch. Follow these tips to impress a VC and mistakes to avoid.

Top tip

Look into the Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS), if you haven't already. Under EIS and SEIS, investors can claim tax relief on their investments in early-stage businesses. And advance assurance will assure them of that.

Final word

This blog isn’t a comprehensive list of all the ways a startup can raise funds by any means, but it's a good place to start.

And remember, your startup's journey is unique - you don't need to participate in every single funding round listed above. Best of luck!

Did you know that you can manage your funding round from start to finish on Vestd AND issue shares directly to investors? See for yourself.