How to get venture capital (VC) funding

Starting a new business in the UK? Whether your company is a startup or a small business looking to take that next big step, you’re going to need funding.

One potential avenue to explore is venture capital (VC) funding. It’s commonly used to nurture, launch and grow startups, particularly in the tech world. In fact, major global brands such as Google and Facebook owe much of their early growth to funding from venture capital investment.¹

But how exactly do you go about getting venture capital funding as a startup? Where do you begin, and how does VC funding work?

Find out everything you need to know here in our essential guide, covering the benefits of VC funding, routes to explore and a step-by-step look at finding and securing the right investment.

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What is venture capital funding and how does it work?

If you’re new to the concept, it can be useful to know a little about what venture capital is and how it works.

Venture capital funding is the process of investing money into a startup or small business, usually one with potential for rapid growth. It’s specifically targeted towards new or young businesses, rather than private equity investment which focuses on established firms.

VC investment supports the development and hopefully, the future viability and profitability of the new company.

Investors in this space are called venture capitalists. They provide an investment usually in return for an equity stake in the business, and make money by selling shares or receiving dividends when the company makes a profit.

VC funding is commonly used for tech startups, including those that are in the very early pre-profit stages of development.

And it isn’t just financial investment that startups may receive as part of a VC funding arrangement. Venture capitalists may also help with strategic advice, to refine and optimise the business so as to give it the best chance of success. This may be advice on successfully launching products into the market, or meeting specific consumer needs.

Venture capital funding usually works in cycles, or rounds of investment - often named things like Series A, B and so on. These cycles are around 5-7 years, and a schedule for future investment rounds may involve new investors coming on board or further funding from existing investors in line with targets for the company’s growth.

How does VC funding help startups?

The most obvious benefit of venture capital funding for startups is money. A large injection of cash at a crucial formative stage will be vital, helping to fund things like hiring skilled staff, developing projects, securing premises or expanding overseas.

And while it’ll mean giving away some equity in the company, it allows startups to access large amounts of capital without having to make monthly repayments.

Other benefits include:

• Strategic guidance and mentorship from an experienced board member
• Valuable networking opportunities and business connections
• Growing the business faster than you otherwise would be able to.

There are also some risks to consider too. This includes loss of control or dilution of ownership, high expectations for the success of the company (which can be hard to live up to) and tight timeframes to meet growth targets.

How to get venture capital funding - routes to explore

So, where do you start on finding a VC investor? There are a few different routes to consider, including government-backed schemes, equity platforms and approaching individual investors directly.

Go through a government scheme

In the UK, there are a few schemes set up and supported by the UK Government which aim to support startups and small businesses. These include:

• EIS (Enterprise Investment Scheme)
• SEIS (Seed Enterprise Investment Scheme)
• VCT (Venture Capital Trusts).

Some of these schemes offer tax breaks to investors as an incentive to sign up, all with the aim of encouraging investment in new UK businesses.

Use an equity platform

Another way to find investors is to register your startup on an equity or investment platform. Many of these connect startups with investors, as well as offering additional services such as managing investments. Others are focused on crowdfunding investments.

Some options to check out include:

• AngelList
• Swoop
• Vestd
• Vestbee

Approach an investor directly

Of course, you can also approach an investor directly. This will involve some research, to find an investor or venture capital firm who is looking to invest in companies that fit your profile.

You’ll also need to develop and fine-tune your pitch and message, so that you can win over potential investors and secure funding.

Step-by-step guide to securing VC funding

To successfully get venture capital funding for your company, you’ll need to do quite a bit of preparation. This involves researching the market, finding and approaching investors and making sure your pitch, offer and message is as compelling as possible.

So you know what to expect, let’s run through the steps typically involved in getting VC funding in the UK.

1. Make sure your business is attractive to VC investors

Not all startups are suitable for venture capital funding. Investors are usually looking for early stage businesses which have potential for growth. Some investors focus on companies with innovative ideas in particular sectors (i.e. tech) while others are primarily concerned with the expertise, background and ‘vision’ of the management team/founders.

They’ll assess the feasibility of the business concept and plan for growth, the USP (unique selling point) of the product or service and competition for it in the current marketplace.

You need to make sure you have all the right ingredients in place before approaching potential investors. This includes a watertight business plan, impressive management team, full financial details and a good idea of how VC funding works.

The British Business Bank website has a handy checklist of things startups can do to ready themselves for venture capital investment.

2. Research the market and identify target investors

The first step to finding your ideal VC investor is to do some research. Most venture capital firms have specific interests, such as focusing on a sector, non-profit or green technology. So, you need to find one that matches up with the profile of your business.

It’s also worth looking into the amount each investor is prepared to invest in a startup (i.e. by looking at their portfolio and past investments) to see if it lines up with your own goals.

Lastly, consider how the firm’s values and ethics align with those of your company. You’ll end up working closely together, and the investor is likely to have a seat on your board - so a good working relationship is important.

You can start your search online, attend networking events or speak to other startups about their VC investors. This will enable you to make a shortlist of VC investors.

3. Create a winning pitch

Securing VC investment often comes down to the strength and persuasiveness of your pitch.

It could be a good idea to create what is known as an ‘elevator pitch’, which is just a short, well-written explanation of who you are, what your offer is, what problem it solves and how big a market you believe there is for it.

As the name suggests, it should be short and impactful enough to be delivered in the time it takes to ride an elevator. The goal is to pique the investor’s interest, and make them want to find out more.

You’ll also need to prepare a longer, much more detailed pitch. This should cover:

• Details of your product/service, including what problem it solves, why it’s innovative and how it fills a gap in the market
• The market size and opportunity for your product/service
• Projected financials and a plan for growth
• A detailed business plan, including plans for launching your product/service onto the market
• Background on your management team, including skills, expertise and what they bring to the business
• Research on market competition, and what sets you apart from them
• How much funding you need and what you will use it for.

4. Approach investors

With your pitch perfected, you can start approaching investors. Bear in mind that it can take months or even years to develop the relationship and come to an agreement. You’ll need to work on nurturing the relationship, and provide any and all information you’re asked for.

If you find the right investor, the next step is to negotiate the terms of investment. It’s recommended to seek professional advice on this, before signing anything.

And that’s it - our essential guide on how to get venture capital funding in the UK. We’ve outlined the main steps involved, including routes to explore and how to craft a compelling pitch.

It takes work, research and time to secure VC funding, but the benefits could be significant. With a cash injection and strategic guidance, your startup could potentially turn into a globally successful company. Good luck!

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Sources last checked on date: 03-Feb-2025