Funding options for your business UK-wide

Raising equity investment

How to attract investment from angel investors, VCs, and crowdfunding platforms in exchange for company shares.

Guide summary

Decide if equity investment is right for your high-growth business. If so, prepare a pitch deck and financial model, then get SEIS or EIS advance assurance from HMRC before approaching investors. Investors will want to see a strong team, traction, and a clear plan for growth and exit.

  • Decide if your business has high growth potential and large market
  • Prepare pitch deck (10-15 slides) and 3-5 year financial model
  • Apply for SEIS or EIS advance assurance from HMRC first
  • Identify angel investors (£10k-500k+), VCs (£500k-10m+), or crowdfunding
  • Understand dilution: seed 15-25%, Series A 20-30%
  • Know SEIS: 50% income tax relief on up to £200k invested per year
  • Know EIS: 30% income tax relief on up to £1m invested per year
  • Expect 4-8 weeks for legal and due diligence process
  • Be ready to give up ownership and some control of your company
  • Check SEIS company age limit: less than 3 years old
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Is equity investment right for you?

Equity suits businesses that:

  • Have high growth potential (investors expect 10x+ returns)
  • Operate in large addressable markets
  • Have clear competitive advantages
  • Can demonstrate traction (revenue, users, partnerships)
  • Have realistic exit potential (acquisition or IPO)

It's less suitable for:

  • Lifestyle businesses prioritising owner income
  • Low-growth, stable businesses
  • Businesses where you want full control retained

Types of equity investors

Friends and family
Often first investors. Smaller amounts (£1k-50k). Less formal terms. Be clear about risks - mixing money and relationships can be challenging.
Angel investors
High-net-worth individuals investing £10k-500k+. Often bring industry expertise and networks. Typically invest at early stage. Many invest via syndicates.
Venture capital (VC)
Professional funds investing £500k-£10m+ (Series A onwards). Expect high growth, board seat, significant governance rights. Target 10x+ returns.
Crowdfunding
Many small investors via platforms (Seedrs, Crowdcube). Typically £50k-£2m raises. FCA regulated. Good for consumer-facing businesses with engaged communities.
Corporate venturing
Investment from established companies. May bring strategic value (partnerships, customers, expertise). Can complicate later fundraising.

Tax relief schemes for investors

The UK offers generous tax incentives that make investing in early-stage companies attractive. Understanding these helps you market your opportunity.

The fundraising process

1. Prepare your materials

  • Pitch deck: 10-15 slides covering problem, solution, market, traction, team, financials, ask
  • Financial model: 3-5 year projections showing how you'll use investment and expected outcomes
  • Data room: Organised documents for due diligence (accounts, contracts, cap table, IP documentation)

2. Get SEIS/EIS advance assurance

Apply to HMRC before approaching investors. Confirmation that your company qualifies gives investors confidence their tax relief will apply.

3. Identify investors

  • Angel networks (UK Business Angels Association, regional networks)
  • VC firms investing at your stage and sector
  • Crowdfunding platforms if suitable
  • Introductions from advisors, accelerators, other founders

4. Pitch and negotiate

Most investors see hundreds of pitches. Your first impression matters. If there's interest, expect multiple meetings before receiving a term sheet.

5. Due diligence and legal

Investors will verify your claims. Be prepared for financial, legal, commercial, and technical due diligence. Legal documentation typically takes 4-8 weeks.

What investors look for

The team

Most important factor at early stage. Relevant experience, complementary skills, commitment, and coachability.

Market opportunity

Large addressable market (typically £100m+ potential). Clear understanding of market dynamics and competitive landscape.

Traction

Evidence that people want what you're building. Revenue, users, partnerships, waitlists - something demonstrating demand beyond theory.

Competitive advantage

Why will you win? Proprietary technology, network effects, first-mover advantage, unique access, or exceptional execution.

Unit economics

Even at early stage, investors want to see a path to profitability. Customer acquisition cost, lifetime value, gross margins.

Exit potential

How will investors realise returns? Similar acquisitions in your sector, potential acquirers, IPO comparables.

INFORMATION

Typical dilution: Expect to give up 15-30% per round

Equity investment means giving up ownership. Typical dilution varies by stage:

  • Pre-seed/SEIS round: 10-20% for £50k-250k
  • Seed round: 15-25% for £250k-1.5m
  • Series A: 20-30% for £2m-10m

Example journey: A founder with 100% starts. After SEIS (15%), seed (20%), and Series A (25%), they hold approximately 51%. Factor in employee option pool (typically 10-15% reserved) and founder stake drops further.

This is normal and expected. A smaller slice of a larger pie is better than 100% of nothing.

  1. 1

    Assess if equity is right for you

    Consider alternatives (grants, loans, revenue). Equity suits high-growth businesses where you'll accept dilution for capital.

  2. 2

    Apply for SEIS/EIS advance assurance

    Submit to HMRC before approaching investors. Approval typically takes 6-10 weeks.

  3. 3

    Prepare pitch deck and financials

    10-15 slide deck. 3-5 year financial model. Data room with key documents organised.

  4. 4

    Build investor pipeline

    Research angels and VCs investing at your stage and sector. Get warm introductions where possible.

  5. 5

    Get legal advice on term sheets

    Investment terms have long-term implications. Use an experienced startup lawyer to review agreements.

  6. 6

    Understand what you're giving up

    Model dilution across multiple rounds. Understand governance rights investors will have.

Equity investment resources

Guidance on raising investment and venture capital schemes.