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In this episode, we delve into the significant trends shaping the world of angel investing and venture capital, with a focus on app startups. This episode delivers a rich understanding of funding sources and investor engagement, tailored for startups and entrepreneurs in the UK, particularly those in the innovative West Midlands region. Tune in for actionable advice that could revolutionize your business's financial journey.

This podcast is for informational purposes only and is not financial advice. Startups and new projects come with inherent risks, and you should seek independent professional advice before making financial decisions.

We examine the resilience of the UK's angel investment market, noting a substantial growth to £1.8 billion in 2022, up from £1.4 billion in 2021, and discuss how platforms like the UK Business Angels Association have become instrumental in driving investment. Meanwhile, venture capital has experienced a downturn, with a 57.7% drop in the first half of 2023, pushing more startups towards crowdfunding platforms like Seedrs and Crowdcube.

We explore the West Midlands' burgeoning tech scene, highlighting the contributions of new networks like Minerva Birmingham in fostering local startup funding. The region's tech sector, the fastest-growing in the UK, has raised over £850m since 2020, emphasizing the need for sustained support to maintain startup longevity.

Throughout the episode, we share insights on navigating economic challenges, preparing for investment rounds, and capitalizing on sector-specific trends, equipping you with the knowledge to attract the right investors in today's market.

Key Topics Covered:

  1. Overview of the UK's angel investment and venture capital (VC) market
  2. Significant growth trends in angel investment and crowdfunding
  3. The role of the UK Business Angels Association in driving investment
  4. The downturn in venture capital in the first half of 2023
  5. Focus on the tech scene in the West Midlands, the fastest-growing region for tech in the UK
  6. The contribution of new networks like Minerva Birmingham to local startup funding
  7. The resilience and growth of the UK's angel investment market despite economic challenges
  8. Preparation strategies for startups seeking investment rounds
  9. Trends in the tech sector that could influence investor decisions
  10. Useful resources and platforms for startups searching for investors.
  11. Tips on how to approach potential investors.
  12. Various types of funding sources available for startups.

Links Referenced and Supporting Content:

  1. 10 conscious angels in the UK investing in ‘tech for good’ in 2023
  2. 2023 Industry Report: Angel Investors
  3. Top Active Angel Investor Networks In The UK 2023
  4. Top UK angel networks for your start-up
  5. Angel investment explained: how to attract angel investors in 2023
  6. Q3 2023 Venture Pulse Report – UK
  7. Gloomy skies: UK H1 2023 VC trends in 4 charts
  8. Venture Capital (VC) investment into UK
  9. VC dealmaking in UK continues to plunge
  10. Global Venture Capital Outlook: The Latest Trends
  11. New Angel Investor Network for Birmingham
  12. Andy Street – Welcome to Venturefest West Midlands 2023
  13. Top 10 Crowdfunding Platforms in the UK for…
  14. 10 UK Startups to Watch in 2023 and Beyond

Full Podcast Transcript

Hello and welcome to the Tech Toolkit by Scorchsoft. This cast is aimed at tech enthusiasts, aspiring entrepreneurs, and visionary app developers! Today, we're embarking on an insightful journey through the diverse funding landscape in the UK. Whether you're sketching out your app idea or you're ready to scale, understanding the nuances of financing is crucial.

Please note, this podcast provides information only and is not financial advice. Remember, startups and new projects carry inherent risks, and it's essential to seek professional advice for your specific circumstances.

With that out of the way, let's get stuck in!

The K's startup funding landscape is a rich tapestry of opportunities. Historically, venture capital has been the cornerstone of early-stage funding.

But as we step out of 2023, we're witnessing a significant shift.

Angel investors in the UK invested £1.8 billion in 2022, up from £1.4 billion in 2021. This growing trend shows the resilience of the UK market, despite Brexit, COVID-19, and geopolitical tensions.

Additionally, there is a noticeable shift towards more democratized financing landscapes. Crowdfunding and peer-to-peer finance opportunities are rising, thanks to regulatory changes like the European Crowdfunding Service Provider Regulation.

Angel investors have become pivotal in the early stages of startup funding. These high-net-worth individuals privately invest an average of 850 million pounds each year

More than just financial resources, angel investors bring mentorship, industry insights, and valuable networks.

Venture capital is the fuel that propels startups forward. However, VC investment has seen continuous quarterly declines since the start of 2022, with a 57.7% drop in the first half of 2023 compared to H1 2022. VCs are increasingly selective, focusing on startups that align with global trends and demands, such as AI and sustainability.

To tap into the rich resource of angel investing, networking is key. Platforms like the UK Business Angels Association and events such as Pitchfest West Midlands are not just networking opportunities—they are the breeding grounds for future business relationships and partnerships.

Engaging with industry events, startup incubators, and entrepreneurial communities opens doors to potential investors. Initiatives like the Minerva Birmingham network are expanding funding opportunities for startups in the West Midlands.

High inflation and interest rates are making the environment challenging for startups to raise money through traditional means like bank loans. This situation is pushing startups towards alternatives like equity crowdfunding, with platforms like Seedrs and Crowdcube at the forefront in the UK. It may also be the reason for the recent decline in Venture Capital funding in the UK, as high intrest rates increases the cost of capital, making debt fuelled venture investments more expensive and risky for these funds.

It's also worth exploring options like Full Expensing and innovation grants, which can provide non-dilutive funding to fuel your growth.

Well, "What next?", I hear you wondering. If you've decided to approach an Angel or a VC fund, then here are some tips on what to do next:

Venturing into the world of angel investors and venture capitalists can seem daunting, but with the right approach and preparation, you can significantly increase your chances of securing funding. Here's what you need to know.

Finding the Right Investors:

Your first step is identifying potential investors who align with your business vision and values. Networks like the UK Business Angels Association and platforms like AngelList can help you discover angel investors. For VCs, databases like Crunchbase and PitchBook provide extensive directories. Always research potential investors to understand their investment history, industry focus, and investment stage preferences.

Creating a Compelling Pitch Deck:

Your pitch deck is your key to grabbing an investor's attention. It should be a concise, visually appealing presentation that outlines your business model, market size, team, value proposition, growth strategy, and financial projections. Remember, investors see hundreds of pitch decks, so yours needs to stand out.

Common Pitfalls to Avoid:

One common mistake is not tailoring your pitch to your audience. Different investors have different interests and priorities, so ensure your pitch addresses their specific concerns. Overpromising is another pitfall to avoid. Be realistic in your projections and honest about your challenges. Investors appreciate transparency.

What Investors Expect:

Investors look for a clear value proposition, a scalable business model, and a strong team. They want to see evidence of market traction, such as user growth or revenue, and a clear plan for using their investment to achieve growth. It's not just about having a great idea—it's about demonstrating that you can execute that idea effectively.

By adhering to these best practices, you can maximise your chances of securing investment. Remember, every rejection is an opportunity to refine your approach and improve your pitch, bringing you one step closer to finding the right investment partner for your venture.

Success with raising funds hinges on being well-prepared, adaptable, and proactive. Whether you're exploring traditional avenues like VC and angel investment or innovative methods like crowdfunding, each path offers unique opportunities and challenges.

So, those are the tips on how to approach an investor... But how should you find them?

To find and approach the right investors, you'll need to research and compile a list of contacts, and follow a sales-outreach approach to arrange meetings. Here are practical ways to gather data and potential contacts for your investor target list:

Option 1: Online Platforms and Directories:

  • A platform for startups and angel investors. It provides a directory of investors along with their investment interests!
  • Connects startups with a large pool of international investors. It's a good resource for finding angel investors and accelerator programs.
  • Offers information about companies, people, and investors. You can filter investors by their previous investment stages, industry preferences, and location.
  • Provides comprehensive data on the global VC and PE markets, including detailed investor profiles. It's a subscription-based service, but it offers in-depth insights.

Option 2) Industry Events and Conferences:

Participating in industry events, pitch competitions, and conferences is a great way to meet investors and collect business cards. Events like Web Summit, TechCrunch Disrupt, and local networking meetups are places where you can find potential investors.

Option 3) Social Media and Professional Networks:

  • - LinkedIn: The go-to professional network where you can find profiles of angel investors and VCs. By following investment firms and joining industry-specific groups, you can expand your network and discover potential investors.
  • - X, formerly known as Twitter: Many investors are active on X, sharing their thoughts on the market and startups. By engaging with their content, you can get on their radar.

Option 4) Angel Networks and Venture Capital Associations:

  • - UK Business Angels Association: This is the national trade association for angel and early-stage investment. They list members and events where you can meet potential investors.
  • - British Private Equity & Venture Capital Association Provides access to industry reports, lists of member firms, and networking opportunities.

Option 5) Local Tech Hubs and Incubators:
Approaching local tech hubs, incubators, and accelerators can provide contact details for their network of investors. They often have partnerships with investment groups and can introduce you to relevant contacts.

Option 6) Public Records and News Outlets:
Investment announcements in news outlets like TechCrunch, Wired, and Financial Times often mention the names of the investing firms and lead investors. Public records can also provide information about recent investments made by VCs and angels.

Option 7) Referrals and Personal Network:
Don't underestimate the power of your personal network. Reach out to your professional contacts, mentors, or advisors who may have connections to investors and can provide warm introductions.

Once you have gathered a list of potential investors, organize it in a spreadsheet with details such as name, firm, contact information, known investments, and any personal connections. Prioritize this list based on how well each investor fits with your startup's industry, stage, and funding needs. With this targeted list in hand, you can begin crafting personalized outreach strategies for each potential investor.

And, there you have it!

We've just touched upon the various types of funding sources available, from loans to equity. We also discussed how to engage with angel investors or venture capitalists and how to locate them. I sincerely hope this enables you to be effective in achieving your startup goals!

But please remember that information in this cast is an opinion only and not financial advice.

Please take it "as it is", and remember that your capital is at risk. Always seek professional financial advice before acting.

And, if you need help implementing your project, remember that Scorchsoft is here to assist you in this exciting journey, offering expertise in app development and digital innovation. If you've found this episode of the Tech Toolkit podcast helpful, consider reaching out to discuss how we can support your venture further. Until next time, keep innovating, keep funding, and keep growing.