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The entrepreneur’s guide to investors

The entrepreneur’s guide to investors

30th April 2018 by Hemant Bedarkar

The Seedrs’ platform attracts a wide range of investors, who although are a diverse crowd, all have at least one thing in common. They’re all looking for investment opportunities in early-stage growth-focused businesses that could offer the potential of significant returns.

Our investor community are either individuals investing their own capital or a range of institutional and intermediary partners who are often investing aggregated pools of capital on behalf of their clients. We take a look at some of the ‘types’ of investors your business could attract when fundraising on Seedrs – in alphabetical order.

Angels/angel syndicates

These are usually, high net worth (HNW) individuals who have an entrepreneurial background themselves or a history of backing early-stage businesses. They may act as mentors to the entrepreneurs, offering their experience to provide advice and guidance, in addition to opening new doors and channels for the founders.

An angel group or syndicate is simply a collection of angel investors that seek to evaluate and invest in businesses together, which generally has a particular focus (sector, type, etc). This can represent a larger pool of capital for businesses.

Corporate venture capital

In an age where innovation is happening globally and the barriers to setting up a new business are falling, corporates are often searching for new businesses. They want to stay current with disruptive technologies that can potentially impact their business or find new complementary ideas that diversify their core competencies.

With large pools of capital, industry knowledge and resources for scale such as marketing and distribution, investment from these investors can be interesting for entrepreneurs as a future joint venture partner or a possible buyout at a future date.

Early adopters / evangelists

Your customers and network are often the best advocates of your business. Offering consumers the opportunity to invest in your business can enhance less tangible measures of success such as customer acquisition and brand loyalty.

Early adopters will often be helpful in providing feedback about your product, ultimately helping with future R&D costs. They can also be useful influencers and brand ambassadors, helping to increase brand awareness for your product.

Family offices

Both single and multi-family offices are an appealing source of capital for entrepreneurs given they represent the capital of some of the wealthiest individuals and families around the globe. Some newer family offices, founded by successful entrepreneurs, will look more like VCs.

Friends and family

It makes sense for a founder to test the reception to his or her elevator pitch for their startup. So, it’s no surprise that friends and family will usually be amongst the first to invest in any given campaign. After all, they want to show support for the founder.

Private banks and other intermediaries

Many large private banks service a range of HNW and family office clients. Acting as a gatekeeper to these investors, entrepreneurs will often have to engage with the intermediary to the clients in order to attract investment.

Self-directed investors (the crowd)

The crowd on Seedrs is a combination of all the investors listed in this blog post – from angels to VCs. This includes the retail self-directed investors to a large group of High Net Worth (HNW) investors whose experience with investing in early-stage equity ranges from newly curious to building diversified portfolios of companies. The crowd on Seedrs is diverse indeed.

Tax-efficient investment funds

Since the Enterprise Investment Scheme’s (EIS) launch over two decades ago, over £16 billion has been invested across thousands of businesses.

Roughly 80% of companies that raise funds on Seedrs have qualified for Seed Enterprise Investment Scheme (SEIS) or EIS tax relief. These tax-efficient investment opportunities are attractive to the vast majority of fund managers who build portfolios on behalf of other investors. The common funds that entrepreneurs should be aware of are SEIS and EIS funds or Venture Capital Trusts (VCTs).

Venture capital funds

Venture capital (VC) funds invest on behalf of a group of institutional (e.g. pension funds, insurance companies, endowments) and individual investors (often Limited Partners). The VC will often have specific sectors or verticals that they like to invest in, reflecting their management style.

In addition to capital, VCs will usually be heavily engaged with the business. This will include active board participation and opening up their networks to help make the business a commercial success. A VC will often be a partner for more than one funding round. If a business proves to be successful, the fund will continue to participate in follow-on funding rounds (subject to capital or investment style) and continue to grow and scale the business.

Hemant Bedarkar

Hemant Bedarkar

I'm the Head of Investor Services at Seedrs

Digital Agency Kent