Ask James Phipson: How to get investors for my small business
In this video, James Phipson, Founder and Head of Advisory at Dragon Argent, emphasises the importance of thorough planning before seeking investment. His key advice? Don't chase funding just because you need money.
Investors are looking for businesses with a clear vision and a solid plan for using the investment. Here are the key points James recommends having nailed down before you raise funds:
Clearly define the purpose of the investment. What specific goals will the funding help you achieve?
Outline the deliverables. What tangible results will come from using the investment?
Set achievable milestones. How will you measure progress towards your goals?
Demonstrate the impact of the investment. What will the business achieve with the funding that it couldn't achieve without it?
By having a well-defined plan in place, you'll be in a much stronger position to attract investors and secure the funding your business needs to thrive.
Next, consider investment readiness programs. In the UK, schemes like SEIS and EIS offer attractive tax breaks for investors in early-stage companies.
Explore these options to make your business more attractive for potential funders. Investors are drawn to SEIS (Seed Enterprise Investment Scheme) based companies in the UK due to the attractive tax breaks offered by the government program. These breaks significantly reduce the financial risk associated with investing in early-stage businesses. Here are some of the key benefits that make SEIS investments appealing:
Generous Tax Relief: SEIS offers up to 50% income tax relief on the amount invested, meaning a significant portion of your investment is offset against your tax bill.
Capital Gains Tax Exemption: Profits earned from selling SEIS shares are exempt from Capital Gains Tax if you've held them for at least three years. This allows you to keep more of your returns.
Loss Relief: If the company struggles and your investment goes down the drain, you can claim back up to 50% of the loss through income tax relief.
Inheritance Tax Relief: SEIS shares held for more than two years are exempt from Inheritance Tax, helping you pass on wealth to future generations more tax-efficiently.
👉 If you need any further information on (S)EIS schemes, check this article: SEIS and EIS Do's and Don'ts for Founders
Securing Investment: Options and Considerations
After determining the purpose and impact of your investment, you'll explore funding options. Here's a breakdown:
Start with Caution: While seeking funds from friends and family can be tempting, James emphasises caution. This approach can strain relationships if things go south.
Business Angels: Experienced Investors: Consider business angels, who often invest in early-stage businesses like yours. They not only provide capital but also bring valuable experience, skills, and mentorship.
Venture Capitalists (VCs): High Stakes, High Rewards: VCs offer significant funding for established businesses with high growth potential. However, they often require a high degree of control over your company's future, including future funding and share ownership.
👉 Download our whitepaper: Demystifying Venture Capital
Bank Loans and Debt Financing: Secured loans from banks can be an option but remember these come with personal guarantees which add financial pressure if your business struggles.
Crafting Your Pitch Deck: When presenting to investors, include a clear exit strategy. This demonstrates how investors will ultimately profit and recoup their investment. Your entire business plan should be geared towards achieving this successful exit.
By carefully considering these options and tailoring your approach, you'll be well-positioned to secure the right kind of investment to fuel your business growth.
How can Dragon Argent help?
You can get in touch by scheduling a discovery call by clicking the link below to have an initial, complimentary discussion to understand how we can help your business.
Founder, Chairman & Head of Advisory
About James Phipson
James specialises in corporate governance, corporate finance and international development. Alongside his role at Dragon Argent he volunteers as a Commander in the City of London Police, where he is responsible for all volunteering, and speaks nationally and internationally on corporate governance and structures.
