Venture Capital (VC) is considered to be one of the most important sources of funding in the UK economy right now.
According to figures published by KPMG, more than £7.4billion was invested by Venture Capitalists in UK scaleup firms during the first nine months of this year, almost equalling the total £7.6billion that was awarded in 2018.
However, while the advantages of venturing down the VC route may be evident for many start-ups and SMEs, it’s a world that can initially appear complex for those who are new to it. We’ve answered some of the most commonly-asked questions to help you on your VC way.
‘What is Venture Capital?’
In a nutshell, Venture Capital, is a form of investment for early-stage, innovative ‘disruptive’ businesses that have a strong growth potential. These organisations, such as JustEat, Deliveroo, Google, Facebook, and Skype, tend to be within the tech space. VC is usually provided in exchange for company shares
‘How does it compare to private equity and seed capital?’
Private equity tends to be awarded to mature companies that have been in operation for several years. Seed funding is given to new businesses and can come from family members, friends and other external individuals, who are widely-referred to as ‘angel investors.’
‘I’ve been accepted for VC funding, what’s next?’
Different Venture Capitalists work in different ways, but from our perspective, the process looks like this:
- We’ll send you a formal offer letter
- If you accept our offer, we’ll then prepare the necessary legal documents
- We’ll also gather references and carry out accounting investigations and market reports
- Your funds will be available once legal completion has taken place (usually around 12 weeks)
‘Why should I choose VC funding?’
VC funding is a good alternative option for businesses that may have been turned down for bank or other traditional forms of funding.
More importantly, it’s not just a financial transaction; VC is a partnership, one that provides you with the tools to succeed. This includes strategic advice from an experienced new board member and access to wider market knowledge and operational and financial best practice. At Midven, we offer a ‘more than money’ approach, working closely with all of our companies to steer and shape strategy, and these outcomes are ultimately the reward for the hard work of the management teams in driving their businesses to become market leaders.
The rise and benefits of VC funding are widespread, as more-and-more companies turn to more innovative ways to turn their business visions into reality. The Q&As above literally scratch the surface in terms of the opportunities that exist and the results that can be achieved through this form of funding alone.
If you’re a high-growth SME or start-up interested in receiving VC funding, get in touch with us. We’ve been appointed to manage £35million of the Midlands Engine Investment Fund (MEIF) and have so far significantly invested in ten West Midlands’ companies. You can read here for more insight on our involvement.
Could the next business be you? To see if you qualify for a slice of MEIF funding, visit https://midven.co.uk/funds/midlands-engine-investment-fund/