Business Finance Archives - Small Business Insider

Choosing the best business bank accounts

Posted on February 28, 2020 Written by Administrator

Choosing the most suitable bank account for your business is important. You want a service that will be easy to use and manage, and one which provides the service you need – leaving you free to focus on running your business.

The good news is that there is plenty of choice out there. In recent years, the number of established high street banks – so-called “legacy” banks – has been joined by an even greater number of alternative “challenger” banks. The majority of the latter have no expensive branch offices to maintain but operate entirely online – and the savings achieved by the use of such technology may be passed on to you, the customer.

Choosing your business bank account

The growth of many alternative banks means that if you are looking for a business bank account, your choice is wider than ever before.

So, how do you find the best business bank account for you? The first thing to note is that the best business bank account for you may be completely different to the business bank account that is best for one of your contemporaries.

Choosing a bank account that is the most suitable for your business depends on your own personal preference and circumstances. So, how might you choose from the business bank accounts available to find the most suitable one for you and your business? What are some of the features you might want to compare?

Ease of set-up

all the high street banks offer business accounts, with the opportunity to apply online too. You may have a five to ten day wait until your account is open – while the bank conducts a credit check on the finances of your business;

many of the online, challenger banks, on the other hand, can set up your business bank account in a matter of minutes, since in most cases, no such credit check is performed;

Services

your choice of business bank account may also be determined by the range of banking services you are likely to require;

if you want to be able to discuss business decisions with a personal manager or have regular cash takings to bank, for example, you may almost certainly need to consider a bank with a physical, in-branch presence;

if your needs can be satisfied by conducting your affairs entirely online – usually with the benefit of being able to do so while on the move, though banking and mobile apps – one of the newer, start-up banks may meet all your needs;

Loans and credit

business loans and credit facilities (such as business credit cards) are also available from a wide range of banks – and the best rates may not be with the principal bank you have chosen for your business account, suggests the small business advisor Informi;

you do not need to put all your eggs in one basket, therefore, but might want to think about “mixing and matching” different banks to meet your various business needs;

Fees and charges

you are likely to encounter introductory offers which provide free business banking services for a certain period – typically this ranges between as little as three but also as long as 24 months;

after that period, there are almost certain to be fees and charges for some – if not all – of your business banking transactions;

the cost of your business bank account, therefore, is likely to be an important consideration.

While there are more business banking options than ever, if you are looking to open a business bank account, the services offered, and the cost of those services may differ widely. To find the best business bank account for you requires a careful comparison.

What is a limited company buy to let mortgage?

Posted on January 22, 2020 Written by Administrator

A report by Landlord Today on the 6^th of November 2019 revealed that an increasing number of investors in buy to let property have purchased via a limited liability company. Nearly two-thirds of landlords are now choosing to invest through limited companies – and not only those landlords with large portfolios of such property, but landlords with smaller portfolios, too.

Limited company buy to let mortgage

The upsurge in purchases by limited liability companies is fuelled by the availability of limited company buy to let mortgages.

So, what is a limited company buy to let mortgage? And what are the advantages of making your investment via a limited liability company?

The mortgage

Just as the term suggests, a limited company buy to let mortgage is a mortgage advanced to a limited liability company to purchase a buy to let property, which is used as security for the mortgage loan.

By no means are all mortgage lenders interested in arranging limited company buy to let mortgages. Those that do may also show preference to limited liability companies that have been incorporated specifically to purchase and to hold buy to let property. Such limited liability companies are known as special purpose vehicles (SPVs).

The benefits of incorporation

The principal attraction of investing in property through a limited liability company is the reduced tax liability – especially if you are a higher or additional rate taxpayer.

As a limited liability company, you pay the standard rate of corporation tax on your holdings of buy to let property. That current rate is currently 19%. As a private individual, on the other hand, you would pay a minimum 20% on your earnings as a landlord (at the standard rate of taxation on incomes up to £50,000 a year), 40% incomes between £50,000 and £150,000, or 45% if you earn more than £150,000.

The steady removal of income tax relief on mortgage interest repayments – the tax year 2020 is the first year in which landlords are entitled to no relief at all – has increased the appeal of incorporation to many higher-earning landlords. The demand for limited company buy to let mortgages has therefore increased, and this specialist sector of the market has become steadily more competitive.

The cost of incorporation

Incorporation – and a limited company buy to let mortgage – may not be for every landlord. The potential savings on the tax you pay need to be offset against the various costs involved in setting up your company:

when you transfer ownership of any existing let property from private into corporate ownership, you are likely to need to rearrange and remortgage the property accordingly – by arranging a specialist limited company buy to let mortgage – and this will involve some costs;

there are also legal costs involved in setting up and registering your company – together with filing the annual return to Companies House;

you need to maintain a registered office address – which may be your own home or the address of your accountants;

accountants’ fees also need to be paid each year for the required audit of both your company and the incomes of its directors and shareholders; and

you may need to pay any fees and expenses involved in transferring from your personal to a business account at your bank.

Incorporation, therefore, may not be suitable for every landlord. But where a company has been set up, by seeking the appropriate financial advice, you may be sure to find a limited company buy to let mortgage.

Understanding the significance of property development finance in 2020

Posted on January 20, 2020 Written by Administrator

As the excitement of the New Year wanes, now is an opportune moment to consider just what 2020 is likely to have in store for the UK financial market. Leaving Brexit to one side, various sub-sectors of the financial industry have either high hopes or big concerns about their relative outlook. Yet for those working in property development finance, there is an optimistic mood.

Property development finance refers to the part of the alternative finance industry that funds property projects. Investors lend their capital to a development finance firm, who then arrange for this capital to be loaned to developers and construction firms undertaking new-build projects. The investors benefit from the potential to earn significant returns, while developers enjoy fast access to the loans needed to fund their construction efforts.

So, why is the industry outlook positive? Well, one major factor is the entrenched demand for housing in the UK. The acute imbalance between housing supply and demand has meant that prospective homeowners are struggling to get on the property ladder. The construction of new-build properties is just one of the many solutions required to meet growing market demand for bricks and mortar. This is where property development finance comes into place, offering quick and efficient lines of funding.

The rise of development finance

In 2008, the UK and world economies were plunged into an economic downturn the likes of which had not been seen since the Great Depression of 1929. With that, well-known high street banks naturally became much more risk-averse and began adhering to more stringent lending requirements. This was the result of public pressure and a government clampdown – the narrative suggesting (perhaps rightly) that banks had been careless.

This shift had a huge impact on the ability for businesses to acquire new loans, and for property developers, in particular, to secure new funding for their developments. But they still needed credit from somewhere, leading to the precipitation of second-level institutions known as alternative finance lenders.

Move forward to the present day and these alternative finance lenders are actively challenging the monopoly once held by the high street banks. And for construction companies in need of finance, there are significant advantages on offer when dealing with a development finance firm. They can either raise all the capital needed for a project, or partner with a heritage or challenger bank if senior debt is required.

Catering to the nuanced needs of the property sector

The property sector places a significant emphasis on the bespoke and individual; all projects have their own risks and benefits, quirks and opportunities. While high street banks may be hindered by blanket criteria when approached by developers, the property development finance sector is prepared to consider all kinds of proposals on a case-by-case basis. This agility means they are able to take new opportunities based on their actual merits and also deliver impressive returns for investors that may not be available elsewhere.

There are also notable benefits for investors in property development finance firms, who are able to personally invest in the oversight of projects and offer any expertise they have along the way. For those who care where their money is going, seeing a project come to life can be a fulfilling and exciting experience.

Further, there is arguably a moral aspect, too. The UK is in desperate need of new, high-quality dwellings, (apparently to tune of 344,000 a year until 2031), and hundreds of thousands of young people cannot afford to get on the property ladder. All this certainly points to the conclusion that any sector that supports and encourages the construction of new property in the UK is doing a huge public good.

In summary, 2020 should be another strong year for the property development finance sector. Increasing market demand for new homes across the UK, combined with low interest rates and the flexibility of property development finance firms to address the demands of their borrowers, means it has an important role to play in supporting construction firms and increasing the UK’s housing stock.

About the Author

Paul Howells is CEO of Accumulate Capital – an investment and property development firm. Accumulate Capital connects registered investors with developers in the property development finance sector to enable selected, high-yielding projects in the UK and overseas.

Invoice finance – a brief guide

Posted on October 21, 2019 Written by Administrator

The recent annual report by the British Business Bank on Small Business Finance Markets revealed that asset finance for small and medium-sized businesses (SMEs) grew by 3% during the period 2018/2019.

Indeed, in 2017 alone some £32 billion was advanced to British businesses in the form of asset finance.

But what exactly is asset finance?

Asset finance

The Merchant Advice Service explains that asset finance allows a business to borrow funds against the value of assets it already owns. The repayment of that borrowing may be spread over several years – so bringing within the company’s grasp otherwise unaffordable equipment, to raise needed working capital or to smooth over temporary cashflow problems.

One of the most valuable assets held by any company, large or small, are its invoices receivable from creditors for goods and services supplied. That asset may be used to raise invoice finance.

Invoice finance

Invoice finance relies on the value of those invoices receivable by effectively selling them to a third party and repaying the sum advanced by way of that sale as and when the invoices are paid.

Invoice finance, in turn, may come in two different forms:

Invoice discounting

the finance provider advances an agreed percentage of the value of your invoices receivable – up to 90% of their value in some cases;

you remain responsible for the collection of outstanding invoices and repay the lender – together with interest (in this case called a “discount charge”) as you bank the receipts each month;

Factoring

in this form of invoice finance, the provider is called a “factor”;

the factor not only advances a percentage of the value of your invoices receivable but also assumes the task of collecting them from your creditors;

once the factor has received payment of those invoices, he will deduct repayment of your advance, plus the costs of the service provided, before returning to you the balance of payments received.

It may be seen that invoice financing is a form of borrowing – using the asset represented by your invoices receivable as security against the loan.

Unlike business loans, however, invoice finance is a more flexible way of borrowing. Repayments of the advance are made as and when payment of the invoices is collected. Repayment is directly proportional to the success of your business in terms of the invoices raised and paid.

Costs

Invoice finance – like any other type of borrowing – comes at a cost, of course. It is not regulated by the Financial Conduct Authority (FCA), but the Asset Based Finance Association (ABFA) – now incorporated into UK Finance – maintains an industry-wide code of conduct. By choosing one of its registered members, therefore, you may be re-assured of reasonable costs.

These might comprise:

a service charge – which covers the provider’s administration, management, and invoice collection costs and are typically charged as a percentage of the turnover of your business (generally, at a rate of between 0.75% and 2.5%); and

a discount charge – is a fee proportional to the sum you draw down against your invoices receivable. It is typically calculated daily and is applied immediately after the money is advanced – currently at a rate of between 1% and 3% over the Bank of England base rate.

Given its flexibility and the reasonable costs involved, invoice finance proves a widely popular method for businesses to raise the funding needed for all manner of operations.

Considering Invoice finance? Speak to Nick at Peak Business Finance

Crowdfunding has nothing to do with fundraising say 52% of start-ups in new survey

Posted on August 15, 2019 Written by Administrator

Why do start-ups use crowdfunding? You might think the answer is obvious but a recent survey we commissioned found some surprising answers. Our report reveals that over half of all businesses undertaking a crowdfunding campaign within the past three years did not rank raising capital as their key motivator.

The findings reflect issues with market perception among growth businesses as to what crowdfunding can do for them. It seems that the perceptions in the market are out of sync with the realities of what is actually happening. What is the next effect? Estimates of success rates indicate that they are as low as 45-55%.

Crowdfunding and ‘free marketing’ myth

Fifty-two per cent of respondents in the survey of 200 said that ‘brand exposure/customer acquisition/PR’ was a primary reason they decided to crowdfund with 24% giving it top ranking. However, when asked what they liked about crowdfunding after having run a campaign this drops dramatically with only 12% giving it a rank of number one. This indicates that expectations of ‘free marketing’ and swathes of new customers aren’t being met.

Beyond expectations, brand exposure through a crowdfunding website isn’t free for companies who are paying upfront fees and/or success fees.

The cost of internal resources on running the campaign are significant. On top of that, if you consider that the average raise in this sample was £332,300 and the average success fee in the market is 3 – 7%, cash-strapped companies would be paying £9,969 to over £23,000 in untargeted marketing spend.

Only 27% of respondents listed access to investors as their primary motive; putting it in 5^th position after: a perceived high success rate, the ability to provide their community with a stake in the business, the reputation of the crowdfunding site and it being a quick way to raise funds.

Why you need your own network

The myth of ‘free marketing’ was only one of many misconceptions uncovered by the survey. The data also clearly show that start-ups are still unaware of what is required to succeed at crowdfunding. When asked what companies liked about working with crowdfunding site, the ability to raise money through family and friends, received a low ranking for 60% of respondents. The reality is that most crowdfunding websites require companies to be a percentage funded before they gain access to the site’s investors and ‘go live’, so this is a critical part of every fundraise. It’s clear that this is not well understood in the market.

Most companies don’t understand just how difficult it is to raise equity. The market perception, that you can approach a crowdfunding website and just sit back and watch the investment pour in, persists. We need to educate start-ups that this is not the case. Naturally crowdfunding sites offer many advantages and there are some great success stories; however, the survey data shows us that companies are still not aware at just how much planning and legwork they themselves have to do.

Start-ups say crowdfunding needs to evolve

Despite the challenges, the idea of crowdfunding is here to stay with 71% of those who’d successfully raised funds indicating they would use the method again and 44% of those who didn’t meet with success saying that they would give it another try.

However, companies cited issues with the current model, namely; lack of control over who views business documents (42%), the inability to communicate directly with investors (38%), paying success fees for investment generated independently from my own sources (28%) and investors being charged to invest (28%).

With these frustrations, 80% of successful companies indicated they were ready for new approach – namely an off-the-shelf website that they could brand and control themselves in order to fundraise.

Crowdfunding is an excellent idea, but it hasn’t evolved since its start in 2011. Companies have grown in maturity since then and this is exactly why we developed Envestry for Scale-ups, our white-label, FCA regulated fundraising platform that empowers our companies – not the facilitators – to control their fundraise.

The survey was undertaken for us, In April 2019, by independent research specialist Coleman Parks. The participants who took part were two hundred businesses who’d used crowdfunding for equity financing within the past three years. If you’d like to read more you can access the report here: http://casestudies.envestors.co.uk.pages.services/Envestors-Crowdfunding-Survey/?ts=1563954577806

ABOUT THE AUTHOR

Scott Haughton is COO of Envestors, a fintech company that connects investors and scale-up companies. With its fundraising platform Envestry for Scale-ups, companies get a personalised site to promote deals, raise finance and engage with their investors 24 hours a day, 365 days a year.

Envestry has raised £100m+ for over 200 companies through its own private investor network.

Founded in 2004, Envestors is regulated by the FCA and has offices in the UK, the Channel Islands, the UAE and strategic partners across China.

Web: https://www.envestors.co.uk/

LinkedIn: https://www.linkedin.com/company/envestors-llp/

Twitter: @EnvestorsLondon

Facebook: https://www.facebook.com/pg/envestorslondon/posts/

The new approach to business fundraising

Posted on August 7, 2019 Written by Administrator

When you need to raise funds for business growth have you ever considered that you may be reducing your chances of success by using a model where time is limited arbitrarily?

Time is needed to raise capital and growth businesses are now realising the benefits of Always-on Fundraising, in which companies leave themselves open for investment 365 days a year.

An open funding round provides an opportunity to capitalise on any unexpected successes, gives the entrepreneur the best chance of finding their perfect investor(s) and with an investor relations mindset being a constant, follow-on funding. As the days of traditional, time-limited funding round are numbered let’s look at what you need to do to make the ‘always on’ model work for you and your business

Always on Fundraising – What needs to be done?

How does ‘Always on’ work in practical terms? While the concept is radically different some of the early steps will have a sense of familiarity, but you are looking at them through a different lens. Here are five key areas of activity:

What is your investment opportunity?

You need to start by defining your investment opportunity which includes deal structure, valuation, share price and your minimum and maximum investment levels.

Even though you’re ‘Always on’, you must have clearly defined investment levels. This benefits all parties. Your minimum investment level protects investors by ensuring that you have a significant cashflow runway to execute on your plans and projections while the maximum level dictates the total number of shares you are willing to sell at that price, protecting the shareholders from dilution.

Get the right tools in place

You need an FCA-regulated environment in order to promote your investment opportunity, accept pledges and draw investment. The new breed of White-label platforms like Envestry for Scale-ups, provide off-the-shelf functionality to allow companies to create a branded fundraising portal that easily links to their current site. With FCA-coverage built-in, companies can focus on the hard work of attracting investment rather than regulatory fine print.

Promote, promote and promote

With your fundraising site up and running, it’s time to promote your investment opportunity. Before you do anything, think about the investor journey by type. For example, personal connections who may be new to investing will need more guidance as they go through the process than experienced investors. To accommodate those new to investing, how-to guides, investment glossaries and frequently asked questions are imperative. Whereas, your communications to experienced investors can focus on the why instead of the what.

Have a first close

Once you hit your minimum investment level, you can do a first close and draw down the pledges, while keeping your round open. This allows you to start fuelling your growth while continuing to attract investment to your maximum level. Up until you reach your maximum you can continue to draw down funds at significant intervals as they come in.

Close a round; open the next

While the name ‘Always on’ might imply one continuous round, the best way of using this approach is via a series of back to back rounds (tranches). As a growing business you will want to change your valuation and share price to reflect the progress you have made. It is worth noting that on rare occasions businesses may also reduce share price, known as a ‘down round’.

So, when is the best time to close one round and open another one? Clearly, once maximum investment level has been reached, the round will have to be closed. Beyond that, anything significant which justifies an increase in valuation, such as a securing a large new contract, reaching a customer milestone or securing regulatory approval on a product, should prompt you to close the round and open a new round at a higher share price.

It makes a lot of sense for businesses to use the Always on Model particularly if they are generally raising funds every six to eighteen months. In future I expect it to be the norm for all companies from seed through to sale to have a section of their website devoted to ‘investor relations’. A section which should attract interest from both loyal and new investors.

ABOUT THE AUTHOR

Envestry has raised £100m+ for over 200 companies through its own private investor network.

Founded in 2004, Envestors is regulated by the FCA and has offices in the UK, the Channel Islands, the UAE and strategic partners across China.

Web: https://www.envestors.co.uk/

LinkedIn: https://www.linkedin.com/company/envestors-llp/

Twitter: @EnvestorsLondon

Facebook: https://www.facebook.com/pg/envestorslondon/posts/

How to get your company through the equity crowdfunding due diligence process

Posted on July 10, 2019 Written by Administrator

Equity crowdfunding presents a fantastic opportunity for early and growth stage companies to gain essential funding, raise awareness amongst the investor community and gain a tribe of loyal supporters.

To unaccustomed eyes, it might look like companies simply post their pitch on an equity crowdfunding platform, such as Seedrs and Crowdcube, and gain investment. However, that’s not the whole story – there are many preceding steps that determine whether a company can even get listed.

When investors browse any reputable platform, they can be confident that the investment opportunities are fairly sound. Investors know that giving their financial backing to any company comes with a risk but they take comfort in the fact that platforms apply their own due diligence process to every prospective campaign.

In other words, the platform looks very carefully at every claim the company makes – and I mean every claim – to make sure it is accurate, can be evidenced, and isn’t in any way misleading. This will include all the content on your pitch page, including your video and team bios. It’s only after this rigorous vetting process that the platform will allow a company to pitch an opportunity to investors.

Frequently unaware of the challenge ahead, many companies fail due diligence and end up significantly delaying their campaign. Rather than deliberately trying to mislead the platform, failure is often due to being unable to evidence claims.

Here are a few tips to give your company the best chance of getting past the crucial due diligence stage and speeding up what can sometimes be a glacial process:

Team bios – be prepared to evidence your team’s credentials

When investors are deciding whether to back your company, they pay close attention to your team’s credentials. For this reason, team bios are an essential part of any equity crowdfunding pitch.

Claims made in team bios often delay the due diligence process more than any other section of the pitch. It comes back to the fact that you have to evidence every claim you make – including your team’s career history. If any of the bios cite “20 years’ experience in marketing” or “spent two decades working as an accountant”, be expected to be asked for evidence going back 20 years to demonstrate this, including tax returns and payslips.

A better approach can be to pull out actual examples of companies your team members have worked for or concrete, provable achievements they made during their tenure. Again, these will have to be evidenced, and you can’t use LinkedIn or a CV!

So, a green technology company claiming that they used to work for the Environment Agency or the National Grid, for example, may need to show a contract or an email from the employer stating that they worked there, how long for, and what role they played.

Likewise, the CEO of a new challenger brand claiming they founded a company and sold it for £5 million will have to provide the documentation to prove the date they founded it and the sale price.

It’s also key to avoid vague statements or exaggerations, instead opting for clear, verifiable facts.

Former employers tend to take ages to get back and, as the platform will definitely ask you for their reference, it’s really worth chasing them up before you’ve even submitted your pitch page.

Know your market, check your numbers,

Unsurprisingly, investors will want to see some numbers to give them an idea of how your company is performing, a picture of the overall market, and how you can further tap into it.

It might sound impressive that you made 10,000 sales last month, or achieved a 300% sales growth in just one year, but can you demonstrate it? If you’re making claims like this, you’ll have to offer the platform a complete list of your sales and show your working.

As such, it’s important to keep your numbers in order. Even if your company is not yet profitable, you’ll need to prove that there’s interest in your product or service amongst your market. Finding reputable stats which show that X% of consumers complain about a problem you have a solution to can prove very useful.

It’s also worth locating original source industry figures which show how big your market is, including the current and projected future trends. Identifying and naming your competition in any documents you’re presenting to investors, and certainly in any docs you’ll be attaching to your pitch page, is another must.

Claiming that you have a one of a kind product or service when there’s competition out there will suggest that you either haven’t done your research or are trying to pretend that you don’t have any competitors.

Videos are not exempt from fact-checking

A key part of any pitch, your pitch video will allow you to communicate the opportunity you’re offering, the character of your brand and the expertise of your team in just a few minutes. Of course, many claims can be made in a short time, and just like any other document you’ll include in your pitch, your video will have to get past due diligence.

Companies that have made their videos in advance of the due diligence process can often fall into trouble. Any claims they can’t prove must be cut, and if they are many, the video will have to be redone, wasting time and money.

Unless you’re confident that you can evidence every claim, then it’s best to hold fire on making a video before you begin due diligence. This way you can write the script, show it to the platform, and ensure that they have no qualms with what you’ll be communicating to investors.

Obviously, you will need to highlight any claims that will feature as on-screen graphics in your script when you show it to the platform, too.

So, make sure you treat your script like any other text you’ll be submitting to the platform. Analyse it line by line, have the clear evidence to hand, and you should be able to breeze through due diligence.

The due diligence process can be tough, and at times, frustrating. It’s also a crash course in how to get your house in order and hone your knowledge of your business and market in a matter of weeks. Trust me, it’ll act as the perfect training – you’ll be vetted all over again by many inquisitive investors once your campaign is live!

If you follow this advice, be clear and transparent and start as early as possible, I’m sure you’ll have little trouble getting past due diligence. What’s more, if you have all the evidence to hand, the due diligence team at your chosen equity crowdfunding platform will absolutely love you.

Best of luck with this crucial stage!

ABOUT THE AUTHOR

John Auckland is a crowdfunding specialist and founder of TribeFirst, a global equity crowdfunding communications agency that has helped raise in excess of £17m for over 50 companies on major equity crowdfunding platforms, with a greater than 90% success rate. TribeFirst is the world’s first dedicated marketing communications agency to support equity crowdfunding campaigns and the first in the UK to provide PR and Marketing campaigns on a mainly risk/reward basis.

John is also Virgin StartUp’s crowdfunding trainer and consultant, helping them to run branded workshops, webinars and programmes on crowdfunding. John is passionate about working with start-ups and sees crowdfunding as more than just raising funds; it’s an opportunity to build a loyal tribe of lifelong customers.

Web: http://www.tribefirst.co.uk

Twitter: @Tribe1st

The impact of digital technology on early stage investing

Posted on June 13, 2019 Written by Administrator

Early-stage investing has always been a very human endeavour, after all matching businesses and investors is all about relationships. So, it’s no surprise that the adoption of digital in this space has been slower than it has been in other industries.

But the sector is now waking up to the idea that digital does not mean impersonal. In fact, it can help people to build deeper relationships, faster. Digital goes this by providing new ways to communicate, share information and ultimately makes finding the right opportunity and deciding to invest easier process for investors.

Two ways digital will transform the world of early-stage investing:

Making it considerably easier for investors to discover deals, complete due diligence and manage their portfolios

In early-stage investments, offline activity is still primary. This is set to change with the introduction of white-label investment management platforms like Envestry for Networks. These platforms allow groups to showcase deals to their investors, in an FCA-regulated environment. Investors can review deal information and documents in a secure area, engage with the management team and other investors and make an investment.

The suggestion here is not that digital will replace offline activities; presentation events and face-to-face meetings will always play a crucial role in any investment decision. Digital will complement these activities in a way that makes the entire end-to-end experience much better for investors.

Connecting the disparate world of early-stage investing

The landscape we have today is the same landscape we had fifty years ago. We’ve got investment networks, clubs, incubators and accelerators, all of whom actively help investors to find opportunities and scale-ups to secure funding – but they are all closed and separate. Our vision for the future is one in which all these groups connect to one another, without sacrificing control or independence. We’ve built a software platform to do just that. Using an aggregated approach, we can bring the world of early-stage investing together in a way that benefits all of those involved.

For scale ups, it means working with one party and gaining wide exposure rather than promoting a deal through a number of disparate networks. For investors, it means having access to a near unlimited number of deals, all filtered according to interest and managed in a single location – regardless of network of origin. For investment facilitators, it means a greatly improved experience for their investors and decreased operational overheads.

But why is now the time? I’ve delved into the market and industry trends to show why I think 2019 is the year that early-stage investing truly adopts digital.

Results – instantly

Instant gratification spans all areas of our lives: instantaneous validation on Twitter, one-hour Amazon delivery, and 24-hour news. So why should the investment experience be any different? If I can find out about anything in the world from wherever I happen to be, why should I – as an investor – wait for a pitch session to find out about investment opportunities?

The ROBO Effect

Borrowing a term from the retail industry, ROBO (Research Online, Buy Offline) reflects a broad behavioural change. People no longer head to a shopping centre to browse for an item, they go online and find what they want and then go down to the store to get it. In many cases, they opt not to go to the store, satisfied with the information they have found online, and make an immediate purchase. This behaviour isn’t particular to consumers: a study, by Forrester Research, found that 68% of business to business buyers researched online independently and a further 62% say they go as far as developing a selection criteria and vendor list based on digital content.

So, why is it different with investing? When people prefer to get information instantaneously and independently, why do we ask them to wait for a pitch event? Using digital, information on potential investment opportunities and any relevant details can be ready for investors to read at their leisure. Further to that, information can be interactive. Potential investors can ask management teams questions – using online channels – and get answers in real time.

Seeking a diverse portfolio

Digitisation has fuelled the unprecedented growth of start-ups in the UK. This has produced a vast – and occasionally overwhelming – array of opportunities, resulting in a trend showing networks are becoming more niche and sector specific. While regional investment networks have long been part of the landscape, they are joined by networks specialising in – for example – Greentech, MedTech or women-owned businesses. This is not a bad thing, but it has caused further fragmentation.

Experienced investors know, that if they are to get the best chance of a return on their investments, a diverse portfolio is a must. However, such specificity throws diversity out the window, leaving investors only one option – joining multiple networks and doing a lot of leg work to build and manage their portfolios.

Digital to the rescue. With an aggregated platform, regional and niche networks can connect to one another and share deals at the click of a button. This allows networks to protect their greatest asset – their investors – while offering them a broader array of investment opportunities without doing all of the vetting and admin.

Uncertainly factor

By mid-2018, the impact of a looming Brexit was already starting to be felt across the industry. With predictions of economic troubles in the UK in the short term, many investors tightened their purse strings, becoming increasingly selective over which investments to make. Yet, at the same time, reports show that foreign investment is at an all-time high: in 2017, a whopping £6bn was invested over the course of the year, with 396 of these deals involving at least one investor from abroad.

This is another opportunity that could be capitalised by digital. With a digital platform, deals can flow across borders – giving investors the ability to further diversify their portfolios, while giving businesses a better opportunity to find investment.

It’s time to follow the leaders in the field and adopt digital in early stage investing. The sector will reap the benefits.

Key players, like The SetSquared Partnership and Britbots, are already well on their way to adopting digital. Digital disruption has begun so as entrepreneurs and investors you can take advantage of the many benefits.

About the Author

Oliver is CEO and Co-founder of Envestors. Oliver sits on the Board of the UK Crowdfunding Association (UKCFA) and sat on the Board of the UK Business Angels Association (UKBAA) from 2006 to 2014. He is also a Member of Court at Imperial College (London). After completing a degree in Finance, Oliver decided not to become an accountant but instead raised equity and bank debt to start Woolleys Healthfoods. The business comprised three retail catering outlets in central London, three organic sausage shops and a factory in the south-east of England, which wholesaled to 200 establishments including Harrods. In 1997 he sold the business to Northern Foods and moved into early-stage investing.

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