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How to optimise fundraising opportunities

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How As venture capitalists demonstrate their willingness to pump more cash into first-time funding rounds, early-stage tech companies looking for investment to fund their growth plans may never have had it so good. But are they taking full advantage of the fundraising opportunity?

Investment Overview

The latest report from London & Partners and Dealroom Co, reveals London start-up investment reached an all-time high in 2021 of $25.5 billion. Globally, the Capital ranks fourth for investment raised in 2021 and created 20 new unicorns, the largest of any year to date.

Within the tech sector, investment was mainly aimed at fintech companies, and there was a vast increase in the number of so-called mega-rounds, which raised funding greater than $100 million. Some of the largest fundraising deals reported in the UK last year were the $800 million funding round for Revolut and the $600 million funding round for Monzo.

The consequential rise in the volume and value of funding rounds for UK-based tech companies over the last year is the result of  an overabundance of capital in venture capital markets and venture capital trust markets. Pent up demand for funding opportunities has consequently been created due to the lack of investment during the pandemic. As a result, venture capitalists are increasingly showing commitment to start-up or seed-stage tech businesses.

Innovation

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An additional factor that is urging investor interest in the tech sector is the acceleration of technological innovation during the pandemic in response to the large increase in online activity. In particular, the groundswell of interest in the development of the metaverse and trending markets for ‘non-fungible tokens’ or NFTs, are developing hype around certain technologies including blockchain and augmented and virtual reality. News articles reporting on sought after digital assets hitting the market and attracting large sums of money, are further illustrating the value that can be achieved.

Capital Investment

With an increase in capital investment filtering through to early-stage tech companies – those at seed series A, B and C – there is a definite opportunity to secure growth strategies and fast track investment for the development of fresh market-ready products. Previously, start-ups and seed businesses may have found it difficult to attract extensive sums of funding due to their absence of track record, but now anything seems possible.

The importance of personality

The secret to attracting funding usually comes down to personality. Investors find it useful to get to know the entrepreneurs behind the business before backing their business plan. It can also be beneficial if the business has an apparent ‘roadmap to revenue’ in order to establish the point at which it will become EBITDA positive.

Depending on the nature of the business, this roadmap to revenue should display numerous strategic milestones, such as the number of users and paying customers. It is also very advantageous to have a strong understanding of the marketplace, and a network of experienced advisors or business angels, as this can also help to aid investor confidence.

Don’t go for the first option

It is vital for tech entrepreneurs seeking funding in 2022, to avoid rushing into anything and giving too much equity away. Rather than accepting the first funding offer that is made, despite how tempting it might be to do so, they should bide their time and stick around for the right deal that they will be happy with further down the line. Equally, it is crucial not to opt for the largest funding on offer without fully considering compatibility and the value that investors may be able to transfer to the business. Through collaborating with trusted advisers with a sound knowledge of the tech funding marketplace, it should be feasible to align several potential investors, with the aim of securing the best deal possible.

For more information on fundraising for your technology business, contact Stephen Hemmings below:

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