The concept of taking investment in exchange for equity in your business is a proposition many founders who want to grow must get comfortable with.
Being reluctant to part company with a chunk of the business you’ve started and grown is understandable but it’s vital owners recognise that they’re almost certainly going to have to trade equity for investment at some point.
It is their best lever to access the necessary growth capital and, done well, can bring key expertise and experience as well as the cash.
It seems like an obvious point to make but if you (as a founder) don’t accept this, you can get hung up over a decimal point and turn down investors who want a bit more equity but would be a better fit for your business and could help that money and runway work better.
However, before you give away equity in your business, it’s essential to go looking for funding from an investor who invests for the right stage of your business.
Earlier this year Brabners published a report with Whitecap Consulting about the North West tech funding landscape, looking beyond statistics to truly understand what it’s like trying to raise capital as an entrepreneur in the North West.
One key trend that we identified in the region is a tendency towards bootstrapping for rather too long with constant small raises which can slow momentum and mean the business misses the opportunities that a bigger fundraise would give them.
However, this is borne also from the environment. Our research revealed that the investment ecosystem up here is evolving with increasing momentum with a really good amount of available capital, well served by private equity but underserved in the pre-series mid-market.
This can drive a more cautious approach to fundraising as PE houses tend to want to minimise risk in their investment and see more traction prior to investment.
Simply put, we need more VC investors who understand the tech scene up here and can bring a less risk-averse and less-conservative mindset to the market.
You can found out more about the report here.