On April 13, 2023, the British government launched the UK Innovator Founder visa. This visa now replaces the earlier Innovator and Start-Up visas. The new UK Innovator Founder visa is now the go-to option for entrepreneurs skilled in technology and IT to enter, set up, and expand their businesses in Great Britain. Although the new UK Innovator Founder visa removed the former requirement of demonstrating £50,000 in investments, applicants must meet several criteria, including a robust business plan, backed by the investor’s contributions.
This guide is designed to assist aspiring UK Innovator Founder visa applicants in securing investments for their business ideas. First, the guide covers the requirements for securing the endorsement for the UK Innovator Founder visa. Following these foundations, the guide will explain the crucial aspect of obtaining financial support for businesses. It offers a variety of avenues for investment acquisition, including venture capital funding, governmental grants, and engaging with angel investors.
The Role of Investors
Before we discuss the different investment sources, let’s break down why having investors on board matters in securing your UK Innovator Founder visa.
To obtain an Innovator Founder visa as a tech or IT entrepreneur, there are three key steps to follow: fulfilling eligibility criteria, preparing a detailed business plan, and securing the necessary endorsement. The latter two points deserve special attention as they significantly influence the outcome of your visa application. Let’s delve into what’s involved in developing a business plan.
Business Plan for UK Innovator Founder Visa
For your project to receive an endorsement, it’s essential to detail your ideas and objectives in a business plan. The essential business plan criteria include:
Although there isn’t a minimum investment requirement for your business plan, securing funding from investment sources can significantly enhance the likelihood of receiving an endorsement. Therefore, your business plan must include a financing section focusing on how the business will secure and manage its financial resources. This includes detailing the sources of funding.
Now that you understand the importance of securing the investments for your visa application, we can now move on to discussing potential sources of investment for your business.
Venture Capital (VC) is a crucial financing option for startups and high-growth businesses in the UK. VC firms invest in these companies in exchange for equity, providing not only financial support but often strategic guidance as well. This part of the guide will explore how VC works, its benefits and challenges, and tips for attracting VC investment. Lastly, it will highlight some top VC firms in the UK.
VC is a form of private equity financing where specialized firms or individual investors provide capital to businesses in exchange for an equity stake. The main targets for VC investment are young companies with little trading history, high growth potential, and innovative products or business models. Popular sectors for VC investments in the UK include software, life sciences, fintech, information security, and energy.
The process typically starts with a compelling pitch and a well-researched business plan. Entrepreneurs need to demonstrate potential for high returns and a clear exit strategy for the investors. The UK VC industry has developed standard investment terms to streamline transactions, and due diligence is a critical part of the process.
Most venture capital financing processes include five stages: the pre-seed stage, the seed stage, the first stage, the expansion stage, and the bridge stage.
The pre-seed stage is the inception point of a startup’s journey. Here, entrepreneurs focus on validating their ideas, conducting market research, and developing minimum viable products (MVPs).
In the seed stage, startups seek their first significant capital infusion. This funding is used to refine the MVP, initiate marketing efforts, and attract early adopters. For instance, Instagram raised $500,000 in seed funding in 2010. Seed funding helps startups demonstrate their potential to grow and scale.
The first stage, or as some call it, the series A stage, is where startups prove their ability to scale and generate revenue. The average Series A round is about $15.2 million. This funding helps expand the team, enhance the product, and target larger markets. Dropbox’s $250 million Series A round in 2011 is an example of how this stage supports significant business expansion.
The expansion stage, often referred to as the series B stage, focuses on scaling up operations. Startups use this capital, averaging around $30.8 million, to amplify their reach, improve infrastructure, and explore new markets. For instance, Blue Apron’s $135 million Series B round in 2015 enabled significant investment in marketing and technology, highlighting the growth potential during this stage.
Finally, the bridge stage, or series C, is where established startups secure large-scale investments for exponential growth, global expansion, and potential acquisitions. Average funding at this stage can be around $58.2 million. During this stage, many investors often choose to sell their shares and conclude their association with the company, receiving substantial returns on their initial inputs.
The optimal moment to seek VC funding depends on your business’s current phase. If your startup reached a Seed or Pre-Seed stage – seek venture capitalists as soon as possible. Early engagement allows them to get familiar with your business, evaluate the risks involved, and consider the potential returns on their investment.
If the business progressed beyond the initial stages, it must demonstrate substantial progress before approaching VCs. This progress includes having a solid customer base, a clear product roadmap, and concrete evidence of your business’s potential for success. These elements bolster a VC’s confidence in their investment decision.
Entrepreneurs should also consider the time of the year when approaching venture capitalists. Many VC firms experience an influx of funds at the year’s beginning, potentially making them more inclined to invest during this period.
As you plan to secure VC funding, consider a timeline of six to nine months. This period includes selecting suitable firms to pitch, negotiating investment terms, and finalizing the agreement. It’s crucial not to wait until your business reaches a critical growth stage to seek funding. Instead, you should prepare a well-thought-out business roadmap that identifies stages for capital infusion.
Benefits of VC Funding:
Risks of VC Funding:
To attract Venture Capital funding, you must convince the VC investor your business has the potential to survive and grow in the UK competitive market. Here are a couple of tips on what to do to make your business pitch more believable and convincing for the target investor:
If you are applying for the UK Innovator Founder visa, the need to craft a business plan shouldn’t surprise you. Make sure to include the market problem your product or service aims to solve, competitive analysis, target audience, and growth strategies of your start-up.
Tip: Frame your business plan like a captivating story for a reader. Creating an engaging narrative story increases the chances of prospective investors being immersed in the problem you are trying to solve. It will make the investor more inclined to put funds into your endeavor.
A novel and promising business idea is not always enough to secure the funding – you must also prove you have the rock-solid human foundation in charge of the start-up. Elaborate on your team experiences, record success, and human qualities, proving they are capable of executing your idea. Remember: venture capitalists invest in ideas combined with decent human capital.
Although this might be a part of the business plan, we decided to dedicate special attention to this point. Venture capitalists want to see proof of business growth and market validation. Demonstrating initial successes, like gaining customers, forming partnerships, or increasing revenue, enhances the attractiveness of your start-up to investors. Emphasize achievements and present metrics to illustrate your start-up’s capacity for growth and profit.
It is important to build strong networks with potential investors. Take part in industry-based meetings, networking events, and pitching competitions to find venture capitalists who look for new investment opportunities. Take advantage of digital platforms, such as LinkedIn and AngelList to connect with potential investors
Tip: Personalize your strategy by carefully studying each investor’s field of interest and portfolio. Adjust your start-up presentation to suit their investment philosophy. Bear in mind that developing trust and a solid relationship with investors is not something that happens overnight, so do your best to be persistent.
When pitching to VC investors, avoid these mistakes:
Following our previous tip, don’t be too persistent. For instance, do you want to receive hundreds of repetitive emails in your inbox each week? Well, the investors don’t want that either. Find a balance between showing your passion for the business and staying respectful of investor’s time and attention.
You must know your potential investors very well. Each investor has their own unique interests and investment styles, so make sure your pitch aligns with their portfolio and goals. Show them that you’ve thoroughly researched by personalizing your approach.
Always acknowledge competition. Investors need to understand who they are and how your business stands out. Emphasize what makes you unique and how you plan to stay ahead.
Keep your pitch straightforward and to the point. Use visuals like charts and graphics to break down complex information and practice delivering your pitch to ensure it’s effective and succinct.
Talking about what your business does is just half the story. Share why you started your business, your vision, and what drives you. Investors are drawn to passion and purpose.
Positivity is great, but realism shows maturity. Ensure that your projections and valuations are grounded in reality. Setting goals that are too ambitious or presenting an overly rosy view of your business can be off-putting to investors.
Now that you know the dos and don’ts of approaching the VC investor, we can introduce you to the list of the top VC firms in the UK. These venture capital firms stand out for their specialized investment strategies and diverse focus areas:
Hoxton Ventures, a venture capital firm based in London, is known for its investments in early-stage technology companies across Europe. The firm was founded in 2013 and has since established a significant presence in the European tech startup scene. Their focus is primarily on startups that have the potential to disrupt existing industries or create new market categories.
Hoxton Ventures recently announced a new investment fund of $215 million, which exceeded their initial target of $150 million. This third fund is dedicated to early-stage investments in European startups, especially those aiming to expand globally, particularly into the U.S. market. The investment sizes per company typically range from $500,000 to $5 million, and there is an intention to increase this figure.
Initial Capital is a unique venture capital firm that specializes in seed and early-stage technology investments. Their focus is particularly on the gaming sector, consumer services, and technology enablers. Unlike traditional VC funds, Initial Capital is composed of a team of serial entrepreneurs who invest their own money and actively partner with startups. They aim to build global category leaders by providing more than just financial support; they offer valuable advice and guidance on various aspects of business growth and development.
It’s a global investment platform focusing on cultivating change in the financial system. Founded in 2010, Anthemis Group is committed to investing in, growing, and sustaining businesses that promote resilience, transparency, access, and equity. With a diverse portfolio of high-growth, digitally native financial services companies around the world, they aim to drive a more resilient, sustainable, and inclusive financial system. Their approach is grounded in authentic collaboration, virtuous cycle outcomes, and diversity and inclusivity, believing that a diverse mix of startups, investors, entrepreneurs, institutions, and visionaries can address the financial system’s challenges more effectively.
Mercia is a strategic healthcare venture fund with over $1 billion in capital under management. They focus on venture and growth equity investments in healthcare information technology and services, as well as medical devices and diagnostics. The investment size ranges from £8 million to £16 million per company, targeting early- to late-stage companies within three to five years of a potential liquidating event. They prioritize partners combining financial strength with solutions and technologies that can improve clinical outcomes, enhance healthcare experiences, and reduce waste.
This firm specializes in sectors such as B2B Software, Bio, Climate, Consumer, Deep Tech, Fintech, and Health. Octopus Ventures has a diverse approach, backing founders who are working on solutions to global problems. They invest from the earliest phase of business creation to later stages of growth, with their sweet spot being pre-seed through to Series A. Their investment process varies slightly depending on the stage of investment, focusing on founders with a strong mission and the ability to scale their solutions
Episode 1 focuses on investing in Pre-Seed and Seed B2B software companies to help them reach a successful Series A. They have been investing in this journey for over 20 years, building long-term relationships and making quick decisions to support the growth of their portfolio companies. They typically invest in seed and Series A rounds of up to £2 million in software-driven businesses.
BGF is a dynamic investor of equity capital in growing companies in the UK and Ireland. They focus on minority investments, offering long-term capital with a streamlined investment process. BGF backs entrepreneurs and innovators across various sectors, including advanced tech, AI & data, food & drink, healthcare, and retail.
The UK government recognizes that start-ups and business ideas from overseas fuel economic growth and technological advancement in the country. That is why the UK government is eager to extend a variety of support mechanisms and programs for incoming start-ups and ideas. From financial grants to expert mentorship, these programs are designed to foster the development of cutting-edge ideas and facilitate the integration of international entrepreneurs into the vibrant UK business ecosystem.
In the following sections, we’ll delve into the details of these programs and grants, offering insights into how they operate, their eligibility criteria, and how they can benefit your start-up.
The Innovate UK Smart Grants program is a significant initiative designed to support innovative research and development (R&D) projects in the UK. It targets small and medium-sized enterprises (SMEs) and encourages the development of groundbreaking new products, processes, or services. Here are the aspects of this program:
Funding Rates: The funding covers up to 80% of the full economic costs (FEC) for academic institutions. For RTOs, charities, not-for-profits, public sector organizations, and research organizations, it can cover 100% of project costs.
The application process requires a detailed proposal outlining the innovative idea, its commercial potential, the team’s expertise, and a robust financial plan. IApplicants must demonstrate why Innovate UK Smart funding is the right choice for their project and how it complements their overall business strategy.
The Innovate UK Smart Grants program represents an excellent opportunity for innovative SMEs in the UK to secure funding and support for projects that have the potential to make a significant impact both economically and in their respective industries.
This program is designed to assist high-growth companies from overseas in establishing their presence in the UK.
Entrepreneurs and founders of innovative technology businesses located outside the UK could qualify for this government support to relocate their businesses. The GEP focuses on providing mentoring and business assistance to founders from outside the UK, aiding them in launching and expanding their businesses from a UK-based global headquarters.
The program’s support includes:
Participants in the GEP receive guidance from skilled entrepreneurs, known as ‘dealmakers’, who have a wealth of experience in establishing, growing, and selling technology businesses. After the founder and their company move to the UK, the GEP continues its support through the Alumni Academy Programme, helping businesses to:
To be eligible for GEP support, you need to be:
Also, your business should:
The GEP also offers endorsement for UK Innovator Founder visa applications. To receive this endorsement, applicants must demonstrate acceptance into the GEP and meet the criteria for the UK Innovator Founder visa.
The SMART: SCOTLAND grant, managed by Scottish Enterprise, is designed to assist small and medium-sized enterprises (SMEs) in Scotland with research and development (R&D) projects. Here’s a concise overview:
Aims to scale up battery technologies in the UK. Innovations should be at a technically proven stage and ready for commercial scaling. Project costs range from £100k-1.1m over 12 months.
For UK businesses developing solutions for household flexible packaging waste collection. Funding requests range from £25k-50k for projects lasting 3-6 months.
Open to UK collaborations focusing on hydrogen storage and distribution. Projects can request up to £1m in funding and last up to 18 months.
Collaborative R&D projects improving sustainable biomanufacturing in the UK. Each project is eligible for £300k-1m in funding.
For UK SMEs developing sustainable food production systems. Projects should be advancing towards commercial viability with total costs between £750k-3m.
Supports advanced robotics and automation projects in manufacturing. UK-registered companies can apply, with projects involving at least one factory and costs between £200k-4m.
For businesses developing quantum-enabled positioning, navigation, and timing systems. Funding ranges from £2m-7m for projects lasting up to 18 months.
Encourages the use of space technologies in the NHS ecosystem. The scope and funding depend on the project proposal.
Angel investors are another option for securing funds for your business and UK Innovator Founder Visa application. Unlike VCs that use investment funds, angel investors use their own finances to put in someone’s start-up. Also, angel investors tend to be more patient and flexible than VCs, giving small businesses smaller amounts of money for a longer time. Still, like VCs, angel investors will seek an exit strategy at some point in your business development, usually in exchange for profits.
We say “usually” because oftentimes, angel investors will not gain a positive monetary return from their investment. That is why angel investors choose to put their net worth into start-ups that they are genuinely passionate about. This way, even if your business does not generate much profit for the investors, they still receive an interest gain beyond the finances.
Pros of Resorting to Angel Investors:
Cons of Resorting to Angel Investors:
Here are a few options through which you can seek angel investment for your business in the UK:
To find angel investors, especially groups or syndicates, use online resources. For instance, the Angel Investment Network is a platform that serves as a meeting point for startups seeking funding and individuals looking to invest in new ventures.
With a network of over a hundred members, 24Haymarket is a prominent UK angel group known for its active investment approach. The group brings a wealth of collective experience in entrepreneurship, investments, and operations, primarily focusing on early-stage, high-growth companies that have already demonstrated commercial success. Investment amounts from 24Haymarket generally range from £60,000 to £4 million, targeting companies with proven products and market traction.
A collaborative investment group, ACF Investors (Angel CoFund) partners with other angel groups for joint investments. This unique model comes into play when a company’s funding needs exceed the capacity of a single angel group, allowing ACF to contribute the remaining necessary capital.
Focusing on technology startups founded by women, Angel Academe is primarily composed of female investors. They prioritize investment in diverse teams, believing they lead to more successful businesses. To qualify for their investment, which typically ranges from £250,000 to £5 million, a female founder or co-founder must own at least 20% founder equity, and the company must be UK-based with a valuation between £1 million and £15 million, eligible for SEIS/EIS tax relief. Full criteria are available on their website.
With a global network encompassing over 300,000 active investors, the Angel Investment Network facilitates exposure for businesses by allowing them to present their pitches online. If an investor is interested, they initiate contact, providing an opportunity for further discussion. This network is an efficient way to expand your investor base, with investment ranges typically between £10,000 and £10 million.
Regarded as one of the largest angel-led finance platforms in Europe and the UK, Angels Den boasts a network of 6,000 investors. They specialize in matching startups and SMEs with appropriate investors, starting with a lead investor before opening funding rounds to their broader network. The sectors they invest in are diverse, with investment amounts ranging from £50,000 to £1 million. Members of their Angel Club gain access to SpeedFunding events, pitch coaching, and opportunities to present at club events to network with other members.
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