Securing venture capital (VC) allows startups to be able to grow and thrive, giving them the means to scale operations, develop new products and even expand into new markets.
In addition to financial assistance, VC can also contribute valuable expertise to companies, especially young startups, with experienced industry leaders providing strategic guidance and access to valuable networks that can help propel companies to new heights.
Securing venture capital isn’t the only way for burgeoning young businesses to develop and flourish. It certainly is seen by many as the best and most effective way to achieve rapid market penetration as opposed to a slower, more organic growth strategy. However, it does involve giving up equity and sometimes, control too.
Who Needs Venture Capital?
While the importance and value of securing venture capital cannot be understated, it’s a lot easier said than done. The process is time-consuming and complex, and trends show that venture capitalists are becoming increasingly selective.
So, it’s essential to start off by questioning whether or not your business needs venture capital and is at the right point in its journey to properly benefit from a large injection of capital investment. Of course, VC isn’t available for free – it requires relinquishing equity and control over your company that would be avoided if you were to stick to bootstrapping.
Thus, deciding whether or not your company should pursue the VC route with regard to funding opportunities is no small question, but if you do, the next thing you’ll need to consider is the difficulties you’re likely to face in the process.
The Difficulties Involved in Raising VC
It’s essential to understand at the outset that while securing VC isn’t, by any means, impossible, it is incredibly difficult. It requires a great deal of time and effort, and there are many things that potential VCs look out for in startups they’re considering investing in.
Some of the most significant challenges involved in attracting and securing venture capital include the fact that it’s:
- Time Consuming: The process of securing VC is incredibly lengthy from start to finish, involving massive amounts of research, prospecting, pitching, answering questions, negotiations and more. It’s normally a lot of back and forth with potential investors, often (more often than not, unfortunately), you won’t end up receiving investment.
- Expensive: There’s no getting around the fact that VCs play hardball. Not only are you going to spend loads of time drawing them in and convincing them to invest in your company, but you’re also going to pay for it. That is, in terms of rates of equity and more. That’s why it’s incredibly important that you’re diligent about writing and evaluating equity term sheets before finalising anything.
- Results in Loss of Control: The ultimate goal of investors is to secure the highest rate of return possible, and one way they do that is by means of equity. The more equity you hand over, the more control they’ll have over your business. While this shouldn’t necessarily be a deal breaker, it’s something you really need to consider in terms of how much control you’re willing to handover in exchange for investment.
- Requires Exit Strategies: Often, what is a dealbreaker for VCs is exit strategies and your long-term plan for the business. Some VCs may be vying for early exit while others may prefer later-stage exit, and it’s possible that their preference may conflict with your plans. If so, it may be difficult to secure investment while you’re not on the same page.
However, just because the process is difficult doesn’t mean that it’s not worth the effort and that there aren’t ways you can improve your chances of attracting and securing venture capital.
What Are Experts Saying?
According to experts, strategies for attracting and securing venture capital very much depend on the specific business in question, but most of all, it’s about focusing on the appropriate VCs and being able to properly and clearly communicate what your business has to offer.
Our Experts
- Tom Webb: CEO and Founder of Element Communications
- Sarah Daw: CEO of the CFO Centre
- Chris Stock: Managing Director at Percipient
- Maria Levitov: Managing Director and Co-Founder at Snow Hill Advisors
- Carrie Stephenson: Founder and Partner at BRAVE
- Ivan Nikhoo: Managing Partner and Founder at Navigate Ventures
- Seb Robert: CEO and Founder at Gophr
- Michael Baron: Commercial Director at BWS
- Amy Pierechod: Partner and Head of Startups and Emerging Companies at Gordons LLP
- Glen Waters: Head of Early Stage Business at HSBC Innovation Banking UK
- Joe McDonald: CEO and Co-Founder at tem.
- Sivan Zamir: Vice President Innovation & Venture, Xylem
- Jesse Swash: Co-Founder, Design by Structure
- Lee Travers: CEO at FinTech Investments
Tom Webb, CEO and Founder, Element Communications
“For any startup looking to win business and raise capital to grow the company, a comms strategy should be in place to drive commercial success and aid investor relations.
A robust communications strategy that will give VC investors confidence should fundamentally plan to grow awareness of your brand, make you relevant to pertinent industry trends, pain points and opportunities and raise your credibility in a competitive market.
Obvious things that will pique an investor’s interest when researching your business include a clear vision articulated by the founder and leadership team; concise messaging that crisply states the size of the market and challenges you’re solving; credible data points that validate your proposition; and examples that evidence how customers have benefited from working with you.
Do not underestimate the importance of profile building. Investors will always do their research, and what they find out before speaking with you directly could make or break your chance of investment.”
Sarah Daw, CEO, CFO Centre
“Hiring a fractional CFO offers significant advantages for businesses seeking to attract investors. A CFO’s expertise in analyzing and interpreting company data to drive revenue, profit, and positive working capital is crucial for informed strategic decision-making and reducing risk for both the business and its potential investors. For companies seeking external funding, a fractional CFO will streamline the financing process and access the right funding sources.
With the rise of the gig economy, hiring a part-time or fractional CFO provides all the essential benefits of a full-time CFO at a lower cost. This option minimizes financial risk since fractional CFOs are typically self-employed and can be engaged on a flexible basis.
For growing businesses, a fractional CFO represents a valuable opportunity to gain strategic financial expertise and support for scaling and can add credibility to the management team. This makes them an essential resource for sustainable growth and investment readiness.”
Chris Stock, Managing Director, Percipient
“As private equity firms dig deeper for value creation and look at new ways to drive growth, deciding which firms to invest in has moved beyond anecdotal evidence and intuition and is resolutely focused on detailed data-driven analysis, intelligence and transparency.
Investors are now much more interested in understanding the ‘how’ and ‘why’ behind certain financial and operational trends, rather than simply accepting the ‘what’ at face value.
Against this backdrop, CFOs have a critical role to play in supporting growth strategies, with 40% of private equity portfolio companies stating that digitising and/or automating more areas of their company is their top strategy for creating value, according to PwC.
To win finance deals hands down over their less informed counterparts, instilling automation, advanced analytics, intelligence and a cloud platform with the potential to leverage AI opportunities is key. Encouragingly, according to Gartner, AI is already part of the fabric of the finance function, with 58% using the technology in 2024, rising from just 37% in 2023.
While the right digital capabilities won’t necessarily increase a company’s valuation when it comes to private equity investment, they will substantiate a valuation and ensure that it stands out in an increasingly crowded market.”
Maria Levitov, Co-Founder and Managing Director, Snow Hill Advisors
“It’s important for startup founders to have a clear and concise elevator pitch that explains what problem they are trying to solve, and how their solution is different from what’s already available. This sounds simple — pinpointing your startup’s main differentiators and explaining why your idea is hard or impossible for others to copy — but it’s easier said than done.
Investors want to quickly understand the scale of your startup’s potential addressable market, your route to profitability and the quality of your team, which will be key for turning your big vision into reality. Communicating all of this in a clear and engaging way when networking and speaking with members of the media to help raise your visibility is a very important component of successful fundraising”
Carrie Stephenson, Founder and Partner, BRAVE
“Attracting venture capital is often as much about relationships and psychology as it is about business fundamentals. While solid business and governance fundamentals are crucial, the human elements of trust, connection, and shared vision play a significant role in venture capital decisions. Here are our no-regret actions, from establishing your business fundamentals to crafting your pitch, building relationships, and finally addressing the psychological aspects of the fundraising process.
– Focus on innovation and differentiation
– Target a large, growing market
– Cultivate a support network
– Show traction and potential
– Provide tangible proof
– Tell a compelling story
– Be prepared and professional
– Build genuine relationships
– Stay attuned to market trends and investor sentiments
– Be confident, but humble
– Demonstrate adaptability
– Be authentic and cognisant
– Generate buzz and show that other investors are interested,
– Be prepared for rejection”
Ivan Nikhoo, Founder and Managing Partner, Navigate Ventures
“Three Tips from Ivan Nikhoo:
1. Understand what drives VCs
VCs are looking to optimise their returns. Many VCs are ex-startup founders or have prior experience working at high-growth companies rather than entering the VC industry from a pure financial services background. They know what it takes to run a successful startup and will likely pay more attention to company aspects, such as the founders’ prior experience and the quality of the team.
2. Demonstrate customer traction
Investors typically prioritise ventures with a foothold in the market and a well-defined strategy for expanding their presence. Simply having a plan is not sufficient – founders need to demonstrate how they’re already creating traction among customers.
3. Always be honest about the fundamentals & unit economics
VCs want the highest possible return and must have confidence in the company’s plan for achieving this. There’s no value in overinflating projections or the market opportunity – it’ll only come back to haunt the founder further down the line. Honesty and transparency are key to building trust among investors, even if the numbers aren’t as strong as founders would like.”
Seb Robert, CEO and Founder, Gophr
“To attract venture capital, you need to be aligning your approach with the type of investors that you are targeting. Broadly, there are two camps. The first is the ‘Patient Capital Approach’ aka the sensible VCs. Usually native to Europe and the UK, these investors are more conservative and focus on solid business fundamentals. Think unit economics, market penetration strategies, and a clear path to exit. Startups need to be able to demonstrate a sensible, sustainable business model with proven or ongoing success, appealing to those who value steady returns.
“Then there is the ‘Silicon Valley Tier 1 Approach’. These are the guys who are drawn to high-risk, high-reward opportunities. They live for excitement and innovative ideas, rather than immediate profitability. If you are looking to them for investment, you need to be generating serious buzz online and have strong public profiles for the people in the business. It’s all about the engagement! Because while these investors do care about monetisation, they recognise that building an audience often comes first.
“Ultimately though, the key is to understand which type of investor aligns with your vision and tailor your strategy accordingly.”
Michael Baron, Commercial Director, BWS
“When it comes to making your business as attractive as possible for venture capital, demonstrating its value, both present and potential, is paramount. In the earliest stages of the business, this will come in the form of a meticulously crafted business plan. For businesses that may already have begun operations, then learning the art of pitching is going to be essential for raising capital.
Talking about your business, its products and services, and why investing is not an opportunity to be missed are all things that should become second nature, being able to speak confidently and cohesively about what you’re trying to do. This needs to be done in tandem with a good pitch deck, something that many entrepreneurs and small business owners fall into the trap of massively overcomplicating.”
Amy Pierechod, Partner and Head of Startups and Emerging Companies, Gordons LLP
“Founders need to demonstrate that they are well placed to tackle the legal and operational
challenges as they gear up for growth.
A starting point is being able to demonstrate a reasonable level of organisation and ‘good
housekeeping’. Having an up to date register of members, having contracts signed and in folders
ready for diligence and your financial model readily available in an Excel format shows that you are
professional and easy to deal with.
Investors are also deterred by lack of rigour around IP arrangements with external providers.
Effective IP assignments with these contributors will protect any innovations and provide further
investor appeal. Founders also need to convince investors they are equipped to ensure effective compliance around specific legal requirements they might face.
The most pertinent example is due diligence around data privacy and protection, which for many tech
businesses is facing increasingly stringent regulatory oversight.
Start-ups can quickly amass personal data, especially when growing their customer base. Failing to
consider a ‘privacy by design’ approach can risk severe penalties from regulators, potentially derailing
investor attractiveness and growth journeys.”
Glen Waters, Head of Early Stage Business, HSBC Innovation Banking UK
1. “Craft a compelling story: Be a visionary – investors love founders who have a clear vision of where they want to go and what the opportunity could be. Ensure your elevator pitch and pitch deck articulates why your solution matters and how big it could be.
2. Build relationships early: Fundraising from VCs is about relationship building. One of the biggest mistakes founders make is waiting until they need the money to start reaching out to investors. Build strong, authentic relationships with potential investors and the ecosystem well in advance of fundraising to increase your odds of success. Think of it as building long-term relationships and rapport rather than just asking for money.
3. Market size: Demonstrate the potential market size and how your business is positioned to capture market share.
4. Team strength: Highlight why you/your team are the right people to win e.g. expertise, experience. Investors bet on the team as much as they do about ideas, especially at the early stage.
5. Demonstrate traction: Investors love to see evidence of growth – whether it is user numbers, partnerships, contracts, or revenue (depending on stage). Investors want to see market validation of your product.
6. Know your numbers: A founder can easily undermine their credibility but not having a grasp on financial performance. Be prepared to discuss unit economics, burn-rate, margins, and cash flow forecasts.”
Joe McDonald, CEO and Co-Founder, tem.
“Many investors and businesses are still dealing with the fallout from the inflated valuations seen between 2020 and 2022, which have proven challenging to grow into. From our experience, there are countless factors you can’t control, including the investment landscape. However, there are two critical aspects you can manage: your product experience and your burn rate.
Focus on your customers and build something exceptional for them. Cut any unnecessary spending and leave your ego at the door – this should be a default mindset for mission-driven companies. Remember, the best time to raise money is when you don’t need it. Concentrate on providing traction and demonstrating your value.
It’s important to note that we may be returning to pre-2019 investment levels, and we could be on the brink of another golden era, thanks to the disruptive potential of AI. It’s becoming increasingly feasible for companies to raise less capital early on while accomplishing much more. Our internal philosophy sums it up well: obsess over our customers and don’t be greedy.
Ultimately, think about why you are uniquely positioned to solve problems, apply effectual thinking, validate your ideas early, and be flexible enough to pivot. Remember that the journey is what counts; the results will come, and they may not feel as significant as you expect.
Sivan Zamir, Vice President Innovation & Venture, Xylem
“To attract venture capital from a strategic investor, start by understanding the company’s technologies and markets, and whether your offering is complementary or disruptive to its operations. Look for champions of innovation and those that your technology can help. Collaborate to demonstrate value with a pilot project that has agreed-upon objectives.
And finally, I always suggest focusing on building relationships – remember, it’s people who drive these investment decisions. Don’t hesitate to be curious, ask questions, and make sure expectations are aligned at all stages.
For example, our corporate innovation and venture team, Xylem Innovation Labs, is a small group made up of entrepreneurs, engineers, scientists, and project managers. We are always interested in meeting new people, learning more about how we can collaborate with founders to address water challenges and scale their businesses in the process.”
Jesse Swash, Co-Founder, Design by Structure
“VC’s are looking for a return on their investment, as significant as possible. You are a big part of making that happen. VCs are investing as much in their belief in your ability as in the idea itself.
So be memorable when talking about the opportunity you see. Be compelling about the addressable market and categories you sit across. Demonstrate your team can deliver in the immediate term. And show them you’ve invested in your go-to-market brand. Because brand is what people say when you are not in the room.
And finally. Don’t hold back. Go for it.”
Lee Travers, CEO, FinTech Investments
“1. Pitch Like a Netflix Series: You’ve got one minute to grab their attention before their minds wander to their Peloton delivery. Your pitch should be a cliffhanger—set up a compelling story, show a massive problem, and offer a solution so brilliant they feel dumb for not seeing it sooner.
2. Show You’re Scaling Faster Than a Caffeine Rush: VCs love the word “scale” more than most people love their pets. Talk about your product’s scalability like it’s already on a rocket ship to the moon.
3. Don’t Be a One-Person Show: They want to see that you’ve assembled a team—even if it’s just you and your dog, give that dog a title (Chief Barketing Officer).
4. Be Uniquely Overconfident, But Not Insufferable: Confidence is key. Be bold about your vision, but make sure they want to have a drink with you after the pitch.
5. Show You’ll Actually Spend Their Money: VCs want to know that their cash is going somewhere useful—not your WeWork membership or an espresso machine for the office. Map out exactly how their funds will be used to scale, develop, market, and, most importantly, bring returns.
6. Have the “Hot Trend” Factor: Whatever the latest buzzword is—AI, sustainability, blockchain—be at the centre of it. If you’re in fintech, say the words “open finance” or “disruptor” with a straight face. They love that.
7. Have a Solid Exit Strategy: VCs are like cats: they want in and out when they feel like it. Show them how you’re going to make them money in 5–7 years, whether it’s through an acquisition, IPO, or selling to Elon Musk (again).”
