With the UK tech sector leading in Europe and raising £24 billion in 2022, its startup scene is booming too. 

Innovative businesses are setting up in the nation’s tech hotspots of London, Manchester, Cambridge and Edinburgh, with big plans on the horizon – from international expansion to the launch of a new product or service. 

So how can the UK’s tech SMEs secure the crucial investment they need to fuel growth?

The economic outlook

The UK’s rollercoaster economy over the past few years, fuelled by the impact of Covid, Brexit and a cost of living crisis, has left many SMEs in the lurch. Big banks tend to favour bigger, more established businesses in their lending criteria, meaning many tech startups do not meet the lending criteria for a traditional bank loan.

But there is a growing and diverse range of alternative finance options out there that can help tech SMEs take their next big steps. Some options leverage capital which is already tied up in the business, such as invoice finance and asset based lending products. There are also products that offer growth capital and amortise like a traditional loan, as well as equity investment options that raise cash in exchange for a stake in the business.
But with all these options, how can SMEs ensure they’re choosing the right funding option for them?

Speak to an expert

With many tech SMEs created by ambitious founders who likely bootstrapped to get their business off the ground, it can be hard to know where to turn to find funding for the next growth stage. But having worked with swathes of SMEs previously, there are financial advisors who know a thing or two about the best ways tech businesses can fundraise.

These advisors can evaluate the specific needs of the business and, due to their established networks, can also flag trusted and reputable funding sources. Advisors with specific alternative finance expertise can also provide direction on the unique offerings of different lenders, helping business leaders to weigh up these USPs alongside conventional metrics such as price, term and security. 

Starting conversations in advance

Rather than rushing to secure investment at the last minute, starting preparations early is hugely important. Many lenders take a keen interest in tech SMEs, so it is worth taking the time to do the research to find a provider that is a good fit for the business and is likely to understand your business’ vision.

However, it isn’t all about finding a lender which meets the SME’s criteria – the business must also show it is worthy of investment. Investors want to see that an SME’s leadership team is strategic and takes the initiative and that they can back this up with well-organised and readily-available documentation. The team also needs to make sure their pitches provide a realistic picture of the business and the vision for growth, as well as how an investment would support this.

How to bring your A game to fundraising

Keep forecasts fair

While SMEs may be tempted to present the best-case scenario in their forecasts, this isn’t helpful when applying for investment. Stick to the facts and where there is risk, explaining how issues will be dealt with can show investors there is a solid plan in place.

Key stats like revenue forecasts, customer contracts and profit margins are all essential at this stage of fundraising, so be prepared!

Final thoughts

While going for growth can be a challenging time for a tech SME, it is also hugely exciting. If investment is secured, the business can take its offering to the next level and potentially reach new heights of profitability and growth.

There is a wealth of opportunity out there to fund the next steps, so take the time to work out the best route and if there are any doubts, seek the expertise of those with a successful fundraising track record.

‘I see an inbuilt bias against female founders’