|
ROM SUPERCHARGING
F GROWTH to investing in product development , there are many reasons why tech start-ups choose to seek external investment .
But in 2023 , we ’ ve seen a significant cooling in this area . In a frostier economic climate , companies are raising less and investors are insisting on more conservative valuations to ensure they can recover the multiples they ’ re ultimately looking for . Investors are also seeking management teams that can demonstrate disciplined capital efficiency , focusing on longterm value creation and , increasingly , reliable annual recurring revenues .
Against this backdrop , more than ever , founders should ensure they ’ re familiar with all possible start-up financing options , including any legal bear traps .
|
As easy as A , B , C : equity investment
Equity investment is still the most popular way to raise funding for early-stage and growing businesses in the UK . Founders often choose this option because traditional bank lending isn ’ t available to early-stage businesses with few tangible assets and limited-to-no revenues .
To go down the equity fundraising route , founders must feel comfortable relinquishing a level of control over their business as shareholdings are diluted . Founders need to work with investors to develop a joint vision for the business . This means dealing with increased scrutiny around how you ’ re using funds , whether you ’ re following your business plan and how you ’ re progressing against preagreed objectives .
Generally , businesses that go down the equity investment route raise more than one round
|
“ TO GO DOWN THE EQUITY FUNDRAISING ROUTE , FOUNDERS MUST FEEL COMFORTABLE RELINQUISHING A LEVEL OF CONTROL OVER THEIR BUSINESS AS SHAREHOLDINGS ARE DILUTED .
|
Intelligent SME . tech |
. tech |
25 |