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Which type of investor will be good for your startup when you are ready for expansion?

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by Startacus Admin


Looking for investment for your startup? Oliver Woolley, CEO and co-founder of Envestors outlines the 8 types of equity investor that you could consider.

When your business needs capital where should you be looking for investors? There are many different options and finding the best one for your startup can be tricky.

photo-1551836022-4c4c79ecde51Here is an overview of 8 types of equity investor to help you as you look at your options.

1. Private investors/Business Angels

Sometimes referred to as business angels, private investors are HNW (high net worth) individuals who invest their own capital. Typically, they will invest between £5,000 and £250,000 per deal, or in groups (‘syndicates’ or ‘networks’), where the deal size can be greater. A big incentive for angel investors is the tax benefits afforded by the Seed and Enterprise Investment Schemes (S/EIS).  So, If you want to appeal to them, investigate your eligibility for the scheme(s). 

According to research firm Beauhurst, the most active angel investment networks are:

  1. Envestors

  2. 24Haymarket

  3. Equity Gap

  4. Archangels

  5. Cambridge Angels 

2. (Seed) Enterprise Investment Scheme (S/EIS) Funds 

Private investors can benefit from tax relief when investing directly into early-stage companies.  Alternatively, they can invest in one of the many independently managed S/EIS funds. These pool the funds and invest into selected early-stage businesses.  As per SEIS conditions, SEIS funds focus upon start-ups looking for their first round of investment of up to £150,000.  EIS funds invest in EIS qualifying businesses although they are highly selective and only 1% of the propositions result in an investment. As well as S/EIS funds there are Venture Capital Trusts (VCTs) which are another tax-efficient vehicle for investors to invest into private companies. VCT managers tend to be highly risk-averse and focus upon investing into established profitable businesses rather than early-stage ventures. S/EIS funds are a great option for businesses, but the market is highly competitive, and most will charge fees.

 3. Corporate venturing 

photo-1459499362902-55a20553e082Corporate venturing is the concept of large corporations investing in start-up companies in order to develop innovative products or services. These corporates view it as a way of outsourcing research and development. With corporate venturing you can benefit from investment, buying power and trade introductions as well as operational, strategic and marketing support. In some cases, the corporate venturer will take a majority stake in your business. 

4. Crowdfunding 

Crowdfunding has grown since it launched in 2012 and has rapidly become a mainstream source of potential investment. Companies can source funding from a large number of individuals, usually customers or fans of the product who want to support the company, and who are not typically sophisticated investors. Crowdfunding platforms such as Crowdcube and Seedrs enable these individuals to invest as little as £10. Crowdfunding is great for brand building, particularly for B2C brands, but with this option you may have to make a trade-off between ‘free marketing’ and attracting serious professional investors. It is also worth noting that typically, you must have secured a significant percentage of the funds before you go live on a crowdfunding platform and if you fail to gain traction, your round may be unpublished.

 5. University seed funds 

Many universities have seed funds affiliated to their technology transfer programmes and focus on areas such as technology invention and innovation. Seed funds typically support innovations from academics within the university.  SETsquared, to take one example, is an enterprise partnership and collaboration between the universities of Bath, Bristol, Exeter, Southampton and Surrey, the five leading UK research-led universities. Ranked as the Global No.1 Business Incubator, it provides a wide range of support programmes and finance to businesses. 

 6. Government-supported funds (UK) 

photo-1616587894998-eb4d3007bbb9There are a number of initiatives supported directly and indirectly by the UK government. This support is provided through the British Business Bank. Examples include the following:

The Angel CoFund 

The Angel CoFund works with syndicates of angel investors to specifically support early-stage growth businesses. Syndicates can look to the CoFund to provide funding of between £100k and £1m in investment rounds from £200,000 upwards. Where the CoFund invests, a fee of 2.5% of the amount invested will be payable to the syndicate manager. 

The Delta Fund 

The Delta Fund, run by ACFInvestors, operates a fast-track process for commercially validated UK businesses. It invests alongside lead angels with deep sector knowledge who are making larger investments via equity or convertible loans. 

Enterprise Capital Funds (ECFs) 

There are over 20 government-supported ECFs operating in the UK. Each one has its own criteria, however, they usually invest £500,000 to £2m in established growth companies which are already profitable, or are near profit. ECFs offer investors the ability to leverage their investment with government debt. 

Business Growth Fund (BFG) 

The BGF is a funding scheme for medium-sized companies launched by the government and the British Bankers’ Association. The £2.5bn fund invests between £1m and £15m in firms in exchange for a share of the business ranging from 10% to 40%. Participating firms must have an annual turnover of £1m and in addition to capital you will receive access to a global network of business leaders and investors. 

Please note, new initiatives are launched and existing initiatives terminated on a continual basis. For up-to-date information please visit the British Business Bank.

photo-1507209696998-3c532be9b2b5 Unsurprisingly, the administration around government run programmes can be a challenge. Make sure it’s the best option for you before you dive into the application process and keep an eye on closing dates. 

 7. Enterprise funds 

The European Union supports three regional funds with funding coming from the European Regional Development Fund. These are: 

It is expected that the UK government will continue support via the British Business Bank when EU funding has ceased.  

Regional Angels Programme 

In addition to the three regional funds, British Business Investments, a commercial subsidiary of the British Business Bank, set up the Regional Angels Programme designed to address regional imbalances in access to early stage equity finance for smaller businesses across the UK. The funds are managed by established private sector funds and business angel groups. In 2021 the government committed £150m in funding for the programme over three years.

 8. Funds 

In addition to the S/EIS funds listed above, there are hundreds of fund managers who manage the funds of private investors. They will charge you a fee so you’ll need to make sure you understand the total costs involved. Each fund manager is likely to manage several funds. Most funds, other than those listed above, tend to invest in established, profitable companies rather than early-stage ventures. The most active include Mercia Fund Managers, Par Equity, SFC Capital, Lloyds Development Capital and Maven Capital Partners. Given the complexities of raising capital we always recommend working with an experienced professional advisor.  They will provide invaluable help to get you through the gruelling fundraising process.


Oliver Woolley is CEO and co-founder of Envestors. Envestors’ digital investment platform brings together entrepreneurs and investors across geographies, communities and sectors – creating the single marketplace for early stage investment in the UK. Envestors partners with accelerators, incubators and angel networks to provide a white-label platform empowering them to promote deals, engage investors and connect to other networks. Founded in 2004, Envestors has helped more than 200 high growth businesses raise more than £100m through its own private investment club. Envestors is authorised and regulated by the Financial Conduct Authority.


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Published on: 5th January 2022

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