Starting a new bed and breakfast business is a dream for many. It can be a rewarding way of gaining financial freedom, you get to meet travellers from all over the world, and after putting in some initial work, a B&B can eventually run smoothly with little effort on your part – so long as you have the right employees in place. In addition, it gives you the chance to become a business owner within the hospitality industry and express yourself creatively through B&B design and decor. Many bed and breakfast owners live at their B&B, allowing them to work from ‘home’ and get away from the rat race and having to commute to work. You could even join a bed and breakfast association and access additional resources to support your business plan and dreams.

Have you always wanted to own a B&B but are not sure how you could fund this dream business?

The good news is that many lenders are keen to work with potential B&B owners as the bed and breakfast itself would offer fantastic security against the loan. In this article, we’ll look at how you can finance a bed and breakfast with business loans and a strong business plan to ensure you get your business off to a strong start.

Can First-Time B&B Owners Get Finance?

Even if you have never owned a B&B or any other business for that matter, you should still find it relatively easy to find suitable financing options for commercial mortgages and business loans. While evidence of experience will work in your favour, it is not the only thing that lenders are looking for when determining the likelihood of you launching a successful bed and breakfast business.

Both banks and private lenders would be interested in providing you with a loan, depending on your situation and the viability of your business plan. If you can show there’s an appetite for paying guests in the area that you’re thinking of opening up a bed and breakfast, and that you’re aware of all relevant regulations and rules (such as a suitable property, fire risk assessment compliance, and food hygiene training courses), then you might be able to convince them of the viability of your bed and breakfast business.

What You’ll Need When Approaching Lenders

Before you start approaching lenders, you must have all of your ducks in order. This will show any lenders that your serious about becoming your own boss and investing in a bed and breakfast business that you’re committed to making a success. Ensure that you have the following.

• A detailed business plan
• An approximate loan amount that you’re looking for based on upfront costs
• Evidence of any experience that you feel may be relevant
• Your personal credit rating
• Details on the property you’re interested in purchasing if you don’t own the property already (and how it lends itself to being a bed and breakfast – or at least how you plan to change the property to make it so – such as installing a dining room area, ensuring there are enough bathroom and bedroom facilities for your business)

What Do I Do If I Don’t Own A Property?

If you don’t already own a property that you could use to convert into a B&B, the amount of finance that you’ll need is going to be significantly higher than if you already own a property and just need a loan for conversion and start-up costs.

Hospitality businesses need to consider what they’ll need from mortgage lenders or business loan lenders to ensure they actually have all of their finances in order before opening. There’s no use applying for a business loan to convert a property just to forget about simple things your guests will expect such as nice decor in the room or some basic tea and coffee making facilities. Running costs, start up costs, and the cost of property changes/purchases all need to be carefully considered to ensure you have the money you need to make a success of your new business.

Take Out A Mortgage

A popular option for many aspiring B&B owners who do not have properties of their own is to use a mortgage. Calculate what you can put forward yourself, and see how much more you’ll need before going to lenders. Knowing your deposit and the likely cost of the properties you’re considering is a good idea so you know the mortgage amount you’ll need, the repayment costs, and whether you can make the business work.

Prepare your bank statements to show your affordability in terms of repayment and ensure you have a strong business plan that will convince lenders of your success.

Get Accurate Figures

Unless you are buying a property that was previously a B&B, you will need to calculate the costs of modifications. For example, B&Bs usually require each room to be an ensuite. So keep these costs in mind.

Try and get an accurate figure of the amount you’ll need by speaking to different builders and construction companies, and be wary of over-borrowing as you may have trouble paying back your loan when the off-season rolls around. Look into the area and get an idea about when the off-season typically is, and consider if any business trips or conferences could support you during the off-season.

You need accurate figures and estimates to ensure you can actually thrive in the bed and breakfast industry.

Keep in mind you will need to apply for a commercial mortgage and not a residential mortgage as the property will be used for business purposes.

Inform Your Current Home Mortgage Lender Of Changes

If you are already paying off a mortgage and are planning on converting your home into a bed and breakfast, you will have to inform your current mortgage lender of your plans to do so. Keep in mind that many residential business lenders may have an issue with you using your residential property for ‘business purposes.’

This would change the terms of your mortgage and might not be permitted by your mortgage provider.

Even if you’re looking to get a new mortgage for a new property, you’ll have to inform your mortgage lender as it could impact your affordability for your residential mortgage.

What About A Business Loan?

A business loan is definitely a viable option when it comes to the costs of getting your B&B up and running, but it is unlikely that such a loan would cover the purchase of a property. A business loan from a bank or other lender may also be suitable to cover conversion and renovation costs, depending on how much work is necessary to get your bed and breakfast into a fit state for serving breakfast and housing guests.

Coming Up With A Solid Business Plan

Having a solid business plan for your B&B should be your top priority. It will give your lenders something to go off and give you a better chance of getting the finance you need to start your business. In addition, it will also provide you with a guide map and help you stay on track. Everything from how you will prepare breakfast to the breakfast menu, what will welcome your guests when your guests arrive and the number of rooms etc will all need to be detailed. As detailed a picture as possible ought to be painted here.

By doing research, you should be able to accurately predict your occupancy rates throughout the year, as well as your expected expenditure. This will give you an indication of what you can expect to profit each month, and therefore what you’ll be able to pay towards paying off your loan every month.

The area in which you run a B&B will also play a massive factor in your expected success.

Ways To Save On Costs Of Opening A B&B

Shop Around For Furniture

One of the biggest costs involved with opening a B&B is furniture and decor. A bed and breakfast should be warm, inviting, and have a cohesive theme. So look out for furniture sales and look at a couple of secondhand shops for affordable, preloved pieces. Shopping around and taking your time building up the furniture you need may save you a lot of money.

Start Small

Another tip is to start small. If you can begin functioning with only a room or two, do so. Wait to gain some income and get the name of your B&B out there before expanding.

Don’t Overdo It On Your Marketing Budget

There are tons of ways to advertise cheaply (or even for free in some cases) on social media, so don’t put all of your budget into marketing.

Do As Much As You Can Yourself Before Hiring Anyone

In the beginning, you should try and do as much of the work involved with running a B&B yourself. This includes replying to emails, managing, responding to guests and even cleaning the rooms. This will save you from having to fork out salaries while you’re still getting started, as well as give a clear idea of the duties associated with each job when you do eventually hire employees.

Financing A Bed And Breakfast Business Conclusion

If it’s your dream to own and run a B&B, there are many ways you can make this happen. Do the research, put in the time and effort, and you should reap the results. It’s important that you research your various financing options and to create a detailed business plan that reassures you and your lenders that you can afford repayments of any loans or mortgages you take out in order to get your bed and breakfast business off the ground.

Hopefully our guide today has helped you understand your options – it’s now your job to research specific deals and get to grip with the details of what a B&B might look like in your area. Do this, and you’re bound to make your business a success.

The post How To Finance A Bed And Breakfast Business appeared first on Real Business.

By Hatty Fawcett, Founder of Focused For Business

Embarking on a new business adventure can often demand a helping hand, even for game-changing ideas. When dreamers set their sights on a fresh venture, the first hurdle is often understanding if their startup needs to secure funds for development, marketing, and snagging top-notch talent. Unless you’re a startup wizard with deep pockets and a wealth of experience, the go-to allies for this financial quest are usually venture capital and angel investors. They swoop in during the startup’s baby steps, known as the seed stage, offering the support needed to turn a spark of an idea into a blazing reality. 

However, quite often, the reality is those superheroes are not always needed. A founder may actually find their startup venture doesn’t initially require funding.

There is no one-size-fits-all when it comes to navigating the funding journey, and in this article, I’ll explore various funding options from third parties as well as how founders can kick-start their business without early financial obligations.

To Fund or Not to Fund: The Startup Conundrum

In the startup realm, not all businesses need funding, especially with the advent of low-code and no-code solutions. Your greatest resource in such cases is time, allowing you to develop your concept without external financial commitments. Building the first version of your product and service and proving you can find customers who want to buy, will stand you in good stead if you do need funding later. If funding is a necessity, options range from grants and startup loans to crowdfunding, it’s a real bonus – and you will get a better business valuation – if you can avoid seeking angel investment or venture capital funding until your startup has proven its worth and is ready to scale. 

The Traction Equation: A Startup’s North Star

Investors don’t throw money at uncertainties; they seek evidence. This evidence is what investors call “traction.” Traction is the heartbeat of a startup, comprising three essential components which make up an equation:
(MVP + Customers) Proven Marketing Machine = Traction.

Minimum Viable Product (MVP): The initial offering that solves a real problem for customers, even if it lacks all the future bells and whistles. Investors crave tangible proof that your product addresses a genuine need or problem.

Customer Validation: Prove that customers not only love your product but are willing to pay for it. Paying customers are the gold standard for investors.

Proven Marketing Machine: Demonstrate you not just secure your first customers, but that you have the ability to grow your customer base predictably through a proven marketing strategy, is what really gets investors excited. Investors want to see a clear formula linking investment in marketing channels to the acquisition of new customers – and they will expect you to know how much you have to spend to gain each new customer.

Navigating the Funding Seas: Options and Considerations

If you find you do need investment to grow your business, what are the options?

Bootstrapping: Setting Sail with Your Resources

Bootstrapping involves using your own funds or time to get your business off the ground swiftly. While it grants you control over your venture, the downside is potential limitations on key decisions due to financial constraints. However, for those who have some initial cash to inject into their startup, this route offers founders complete autonomy over their business and finances, without getting into debt early on.

Bank or Start-up Loan: A Boost When Needed

When your bootstrapped business needs an extra push to reach a crucial milestone, loans become an option. They can offer a quick injection of funds but with this comes the responsibility of repayment, impacting your early cash flow. Most banks won’t offer a loan until you have two years of trading history, but the UK government offers start-up loans, dependant on credit checks, of up to £25k per director in the business. Often successful applicants will also receive guidance on writing business plans and 12 months of free mentoring. Remember, do your research before committing to any loan.

Angel Investment: Wings of Support and Expertise

Angel investors bring more than just cash; they bring skills, experience, and valuable connections. However, securing angel investment can be time-consuming, and entrepreneurs may need to compromise on some aspects of their vision to attract investors. If you can kickstart your business without third-party funding, and start to gain traction, this can help attract angel investors down the line as you start to de-risk the opportunity before investment is required.

Crowdfunding: Testing the Waters and Raising Funds

Crowdfunding has become increasingly popular in recent years; however, it does rely on having a decent community or network in place. Most crowdfunding platforms will expect you to bring 50-70% of the funds you want to raise to the platform from your own network. One of the big benefits of crowdfunding is, not only the capital raised but also the ability to test product demand and build a community of brand ambassadors. However, it demands significant effort behind the scenes to ensure a successful campaign so is not for the faint-hearted.

Venture Capital: The Holy Grail or a Tempting Mirage?

Venture capital can feel like the pinnacle of funding options, offering substantial investments and extensive networks. However, VCs are selective, typically focusing on businesses with exponential growth potential. Entrepreneurs must be prepared for increased governance and potential loss of control. This funding avenue typically demands that your business has already gained traction and can deliver a substantial return for VC’s through an “exit” that usually involves a trade sale or floating on a stock market (IPO), so this option is usually a consideration for later-stage business, not early-stage startups.

Finding Your North Star: The Best Way to Fund Your Business

In the diverse landscape, the best approach depends on your business’s stage, growth ambitions, and what you’re willing to offer investors in return. Whether charting your course with bootstrapping, loans, angel investment, crowdfunding, or venture capital, understanding the language of investors and showcasing traction will be your compass.

As you set sail on your startup journey, remember that each funding option is just one island in the vast sea of possibilities. Choose wisely, align your motivations with your investors, surround yourself with people who can support you on the journey and navigate with the confidence that comes from understanding the currents of the startup funding ecosystem. In this dynamic and challenging landscape, adaptability is your ally, and the successful navigation of each funding stage contributes to the rich tapestry of your entrepreneurial story.

About Hatty Fawcett

 Hatty has a strong track record raising equity investment for early-stage startups, raising over £5m for start-ups in the last 12 months. She believes start-up investment should be available to everyone and the process shouldn’t be over-complicated or unnecessarily time consuming. 

Hatty focuses on start-ups raising their first or second round of equity investment (typically raising £100K to £1 million). She works with start-up founders and small business owners to give them clarity on the information that investors will expect and connecting them to investors and other like-minded entrepreneurs who are generous in sharing their experience and insights. Hatty encourages founders, giving them knowledge, tools and techniques, they can use in their investor outreach, so they grow in confidence and ability when presenting their investment opportunity. This confidence ensures founders attract a range of investors, allowing them to choose the right investor for their business and growth aspirations.

Hatty has more than 10 years of experience in getting startups funded and has seen investment from both sides of the fence, so is uniquely placed to understand the founder journey and what early-stage investors look for. Following a successful 15-year career in marketing, and a MBA from Imperial College, London, Hatty worked in two start-ups before launching her own start-up, for which she raised a quarter of a million pounds. She then looked after some of the investments Kelly Hoppen made when she was a Dragon on the TV show “Dragons Den”.

Hatty’s unique perspective on start-up funding, and the work she does to level the playing field when it comes to raising equity investment, has resulted in her being recognised as Enterprise Nation Adviser of the Year 22/23 for Finance and Funding. She was also a Finalist in the Great British Entrepreneur Awards 2023.

The post From Idea To Strategy: A Startup’s Guide To Navigating The Funding Journey appeared first on Real Business.

Equity investment expert and founder of Focused For Business, Hatty Fawcett reveals what angel investors look for in a start-up and how founders can appeal to them.

Networking is a natural part of building a business, particularly when it comes to securing investment. As a start-up, it can be daunting navigating the investment space, and it can take time to work out what makes your business stand out to investors and, indeed, from your competitors. 

Angel investors play a key role in early-stage funding – bringing not just their cash but also their sector knowledge, business experience and also their contact book with them. These things can help a start-up get to where it wants to be quicker and with more success than just having investors cash! But all investors are different. Each will have their own preferences when it comes to making investments. We may not be able to read minds (to work out what each angel investor’s preferences are) but here I give you a checklist of some of the key things all investors will want to know about, irrespective of any additional preferences. 

I found these out the hard way. When I was raising investment, I wasted 4 months talking to investors who were never going to back my business because I had met some of these key criteria. Had I known then what I know now, I would have spent more time building my business to prove demand before speaking to investors. Hindsight is a wonderful thing and here I share what I learnt so you don’t waste the time I did!

A Compelling Vision and Mission: 

Angel investors are drawn to start-ups with a clear and compelling vision. They want to see that the founders are passionate about their idea and that they have a long-term mission beyond just making money. But, a sense of purpose and vision is not enough for investors. They want to know you are solving a real-world problem, and that you have identified who experiences this problem and what impact it has upon them. If you can demonstrate you are saving your customers time or money, or that you are allowing them to do something they previously couldn’t do, you are more likely to attract angel investment. A well-defined problem – and, of course, a clearly defined solution – will also serve as a north star for the founding team, guiding the company’s decisions and actions as it grows. If you are unsure whether you have developed a solution to a big enough problem, consider consulting a business mentor or a professional in your network so you feel confident when pitching to an angel investor.

A Strong and Coachable Team: 

Investors often say that they invest in people, not just ideas. A capable and dedicated team is a critical factor for angel investors. They look for founders who have the right mix of skills, experience, and determination to bring their vision to life. Furthermore, being coachable is equally important. Angel investors want to work with founders who are open to feedback, willing to learn, and adaptable. A team that can execute and pivot when necessary is a valuable asset. 

A Market with potential: 

We’ve already explained that start-ups must address a genuine market need or pain point to attract angel investors. Investors also want to see that there is sizable demand for this product or service too. They need to know there is potential for a large and sustainable market. A thorough market analysis that clearly identifies your target customer (not just with demographics but with clear articulation of the impact of the “problem” they face and their behaviours and characteristics), an overview of the current competition and potential growth opportunities is crucial in demonstrating the market’s need – and in gaining investors who will back your business. 

Business models that scale and offer growth potential: 

Angel investors are interested in companies with the potential to scale rapidly, and tha have clear plans for monetising an opportunity. They want to invest in start-ups that can grow exponentially – or that have the potential to capture a lucrative niche in the market – and who can articulate a series of profitable revenue streams that will develop as the business scales. Scalability can be achieved through innovative business models, technology-driven solutions, or the ability to tap into new markets. If you can demonstrate a clear plan for scaling the company, and generate a substantial return on an investor’s investment, you will have their attention! 

Traction and Milestones: 

Angel investors look for evidence of traction and progress. Traction is a spectrum, rather than an absolute. It includes evidence that you have built a product and service that customers love – better still that they will pay for. It also includes evidencing you know how to get more happy, paying customers. There are different ways to evidence traction which include metrics like user growth, revenue, or partnerships. Start-ups that have reached significant milestones, such as securing paying customers or achieving product-market fit, are more attractive to investors. Demonstrating progress not only validates the business concept but also reduces the perceived risk for angel investors and gives you more opportunity to negotiate a business valuation in your favour. 

When it comes to attracting investors you don’t need to have all the answers but, the more work you have done to present your business in a way that gives investors the information they need to understand the opportunity, the more likely you are to secure meaningful conversations with investors. Using these indicators, which I learnt the hard way, through hundreds of conversations with investors, will give you a head start and help you stand out in your investor conversations.

About Hatty Fawcett

Hatty has a strong track record raising equity investment for early-stage startups, raising over £5m for start-ups in the last 12 months. She believes start-up investment should be available to everyone and the process shouldn’t be over-complicated or unnecessarily time consuming.  

Hatty focuses on start-ups raising their first or second round of equity investment (typically raising £100K to £1 million) and works with start-up founders and small business owners to give them clarity on the information that investors will expect, and connecting them to investors and other like-minded entrepreneurs who are generous in sharing their experience and insights. Hatty encourages founders, giving them knowledge, tools and techniques they can use in their investor outreach so they grow in confidence and ability when presenting their investment opportunity. This confidence ensures founders attract a range of investors, allowing them to choose the right investor for their business and growth aspirations.

Hatty had more than 10 years of experience in getting startups funded and has seen investment from both sides of the fence, so is uniquely placed to understand the founder journey and what early-stage investors look for. Following a successful 15 year career in marketing, and a MBA from Imperial College, London, Hatty worked in two start-ups before launching her own start-up, for which she raised a quarter of a million pounds. She then looked after some of the investments Kelly Hoppen made when she was a Dragon on the TV show “Dragons Den”. 

Hatty’s unique perspective on start-up funding, and the work she does to level the playing field when it comes to raising equity investment, has resulted in her being recognised as Enterprise Nation Adviser of the Year 22/23 for Finance and Funding. Hatty was also a Finalist in the Great British Entrepreneur Awards 2023.

About Focused for Business

Focused for Business is on a mission to  level the playing field and make it faster and fairer for founders to raise early-stage (pre-seed/seed stage) equity investment. 

Best known for its flagship programme, Funding Accelerator, Focused For Business gives founders the knowledge, tools and techniques to position their business for investment, find and attract the right investors and secure the investment to grow their business. 

Since Funding Accelerator launched in 2020, the programme has raised over £11 million for start-ups, £5m of which was raised in the last 12 months.

The post What Angel Investors Look For In Start-ups appeared first on Real Business.

If your small business is looking at raising funds, selling shares may be a viable option for you. Selling shares is also often used as a solution to reducing debt, as shares can be sold in place of taking on debt from various loans and other financing options. So it is safe to say that selling shares has a lot of advantages to offer business owners.

But selling shares is not always as easy as it sounds. It is important that you thoroughly understand the processes involved before you start raising funds through selling shares. In this article, we provide you with a simple guide to raising funds by selling shares to investors.

What are shares? Understanding shares before you sell them.

Before you begin the somewhat complicated process of selling shares, you must have a comprehensive understanding of what shares are.

So what are shares? In simple terms, shares are pieces of stock that are sold or issued to investors, essentially giving investors a share in your business. You need to keep in mind that by selling shares, you are, in a way, handing part of your business ownership over to someone else. Each share gives the shareholder a percentage of ownership in your business.

Before any company issues any shares, they need to be legally entitled to do so. In some cases, issuing extra shares will need to be met with approval by your company’s current shareholders. To avoid diluting your company, you may want to offer new shares to existing shareholders first.

Drawbacks of selling shares

While there are obvious advantages to selling shares, there are also numerous drawbacks that business owners should be aware of.

By selling shares to various investors, you will be dividing up the profits that your company makes as the more shareholders there are that hold shares in your business, the more people there are that you will have to share your company’s profits with. If you are one of the company’s original owners, this will hit you the hardest because even though selling shares helped you raise funds, it definitely hurts to have to give away your hard-earned company profits to investors. These company profits may have been your direct revenue. So think carefully if you want to have all of your hard work, creativity, and innovation sold off as shares.

The other major drawback associated with the sale of shares is that the original business owners also experience a loss of control when it comes to their business. Because shareholders become part owners in your company, they have somewhat of a say about how your business operates. Shareholders may disagree with you, which may cause various problems and stresses for you and your business.

What are the different types of shares?

Not all shares are quite the same. There are many different types of shares that your business can choose to sell to raise funds, and it is important that you are aware of the different options available to you.

Some of the different types of shares include:

Ordinary shares

Ordinary shares are the most common type of share sold to raise capital for a new business. The sales of these shares are seen as permanent funding, and they cannot be repaid in most cases. Your business has the opportunity to purchase your own shares to keep control of your company. Ordinary shares offer one vote per share.

Preference shares

Preference shares are shares that ensure that control remains in the original shareholders’ hands. These shares are easily redeemable. Preference shares also entitle the business owner(s) to receive a certain amount of dividend each year, and are a way to protect the original owners of the business. However, these shares may not be very attractive to potential investors.

Non-voting shares

Non-voting shares are a type of ordinary share, except they do not offer any voting opportunity, turning the shareowner into a silent shareholder. These types of shares are often given to the employees of a business.

Corporate bonds

Corporate bonds are shares that are often issued to obtain loans. Corporate bonds will usually only interest financiers in cases in which the company is quite established. Smaller companies can battle when it comes to using corporate bonds to their best advantage.

Redeemable shares

Redeemable shares are shares that come with the promise that the company will buy back these shares at some later stage. These shares are usually often non-voting shares..

Do current shareholders need to receive the first choice when it comes to new shares?

We have an act known as the Companies Act in the UK, which states that shareholders should be given ‘pre-emption’ rights. These rights will benefit current shareholders in that they will be given first choice in new shares, which will be directly proportionate to the shares they currently own. This is also usually beneficial to the business owner as they reduce the dilution of ownership in their business.

There are cases in which pre-emption rights need not be prioritised. These cases include when shares are issued to employees in a share scheme or any shares that have been issued for non-cash payments. It is also very common for business owners to ask their shareholders not to apply their pre-emption rights, especially if they do not have many shares.

Are there any restrictions on the number of shares issued by new businesses?

In the UK, there are no legal obligations for the minimum and maximum number of shares that should be issued for a private company.

When it comes to public limited companies, things are slightly different. These companies need to have a minimum issued share capital with a minimum nominal value of  £50,000 in sterling.

Remember, shares represent a percentage of ownership in your company, and there are many cases in which issuing more shares could be better for the company and the sharing of its profits. For example, if there are only two shares, each share accounts for 50% ownership, and so on.

What does the process for issuing new shares look like?

The process of issuing and selling shares can be complicated and may look quite different depending on what type of shares you plan to sell. Differences and variations to the following process may also occur, depending on your company type, but typically follows this structure:

Determining the details of your shares

Deciding on the types of shares and how many you wish to issue is very important. You also need to decide on the proposed prices of the shares you wish to sell. This price is usually dependant on supply and demand, but you may want to speak to a financial

advisor to ensure that you aren’t selling too high or too low.

Look at any current documents and speak to current shareholders

Speak to any company directors or others who may have a say in the company’s operations, and see what they have to say about issuing out more shares from the original shareholders. They may be able to offer valuable advice but may also oppose the sale of more shares. In which case, a shareholder resolution may need to take place. Look into pre-emption rights and the Companies Act, as well as any shareholders’ agreements and articles of association. Ensure that the shares you plan to issue comply with all of these documents.

Offer shares to existing shareholders

Offer the issue of new shares to any existing shareholders first, according to pre-emption rights that you may have in place. If your current shareholders are not interested in purchasing more shares, or you are not obligated to offer new shares to them, you can begin seeking out potential investors. Choose potential investors very carefully, especially if the shares you are selling offer these shareholders a vote. Once you have spoken to a few investors, provide any interested investors with the proper application forms.

Selling the shares

Once you have received all your applications, shares will usually be allotted through a board resolution where investors will be chosen based on their applications. The next step is to allot share certificates to all new shareholders. When issuing new shares, you notify Companies House. You can do this by filling in the SH01, which is relatively straightforward. You should also attach a copy of shareholder resolutions.

Your accounts

You will need to go to your accounts and ensure that your company’s register is updated with new shareholders and share certificates once any shares have been sold. Include the new share allotments in your business’s next Confirmation Statement. Remember that shareholders will receive a percentage of your business profits.

There is a lot of paperwork and admin involved with this process, meaning that there is a lot of opportunity for mistakes to be made. As we said, different types of shares will also come with their own unique requirements, so the above processes must be looked at as a basic skeleton when selling shares. Ensure that you understand the process in detail before embarking on it, and speak to financial professionals should you feel that you need help. This is definitely not a process that you should wing.

How can I make my business look more attractive to potential investors?

It is all good and well to want to sell shares in your business to raise funds. But it can be incredibly disappointing to make this important decision only to find out that you have no potential investors interested in buying your shares.

So before you even start advertising the sale of your shares, you should make your business as attractive as possible to potential investors. Remember also only to approach investors that you would want to have a share in ownership in your business!

Have audited financials

One of the first things that potential investors want to see is an audit of your company’s financials for the past three years or more. There should be proof that the numbers that you are claiming are indeed true. No one wants to invest in a business with faulty financials, so ensure that you always keep accurate records to make the auditing princess easier and quicker.

Eliminate excess costs

Make your business appear more attractive by eliminating any unnecessary costs. Unnecessary costs mean fewer profits for shareholders, so show your potential investors that your business knows how to spend wisely.

Be transparent

Investors appreciate transparency. They want to know why you want to raise funds, what you are looking for in terms of shareholders, if you wish to redeem shares at a later stage, and if you have an exit strategy. Being upfront from the get-go will also save you issues later down the line.

Having good leadership in place

Faulty leadership is where many companies fail, and is a huge turn-off to potential investors. Ensure that you have a proper leadership structure in place and that your company has highly dependable leaders.

Have growth plans in place

Investors want to invest in businesses that are set to grow. How does your company plan to grow? Ensure that you have a detailed growth plan available for investors to read over when deciding if they want to buy shares in your business.

Selling shares in your company can seem like an easy and hard-and-fast solution to raise funds, but it is usually far more complex than that. Understanding the ins and outs of selling shares and knowing the different types of shares will help you make the best decisions for you and your business.

The post A Guide To Raising Funds By Selling Shares To Investors appeared first on Real Business.

A business angel, or angel investor as they are also known, is an individual who invests in a company, typically after seeing the startup pitch and deciding to invest. They are often successful entrepreneurs or investors themselves, with their own track records of success. These individuals can be very helpful for startups because they bring not just money but also valuable experience and connections that help can your company grow and succeed.

But where can you meet a business angel? And how can you maximise your chances of them investing in your company.

In this article we will answer these questions and many more to give you all the information you need about business angels.

What is a business angel?

If you have ever seen Dragon’s Den, or the US equivalent Shark Tank, then you will already have seen business angels in action. They are wealthy individuals who invest predominantly in startup businesses to help them get off the ground. They typically invest after seeing the company’s pitch and deciding to put their money into it, usually in exchange for an equity share in the company. The idea is that the equity share will grow in value as your business progresses, and that the business angel can get a share of the profits each year. It is often difficult for smaller or newer startups to secure funding, so a business angel can fill a funding gap either temporarily or on a long-term basis.

There are business angels who only invest in companies within their specialist industry, and those who like to have a more diverse portfolio of investments. Likewise, there are some business angels will allow you complete autonomy in the day-to-day running of the business, while others may want to take a more hands-on approach. The latter can be particularly useful if you are a young or inexperienced business owner.

What benefits can a business angel bring to your business?

The main benefits of a business angel investing in your company are of course their money, but also the useful connections and know-how that they often bring too. Angel investors can be incredibly beneficial for growing companies because you get access to their knowledge and expertise, particularly if they have a lot of experience in your industry, which can help your company advance.

Furthermore, having someone with an established reputation backing the success of the startup will go a long way when trying to secure additional funding, as it shows that there are influential people who already believe in you and your idea. For instance, if you watch Dragon’s Den, the contestants often have a particular dragon they want to bring on board, because that individual’s name alone can provide access to a certain industry or market.

It is important to note, however, that some business angels may want more than just an equity share though. Some angels prefer complete control over how the business is run while others may ask for more input such as through a board position or even a co-founding role.

What do you need to know when looking for a business angel?

There are a number of things that you need to know when looking for business angels.

Firstly, it is important to remember that these individuals can be incredibly busy and so will not have the time to invest in every startup they see. Therefore, what should your strategy be?

One option is to simply send out cold emails or call up potential investors without any prior contact or introduction. While this may work occasionally, with no personal connection having yet been made, your pitch will need to stand on its own merits rather than your ability to sell the idea.

It is, therefore, better to try and establish a relationship with a potential business angel before attempting to pitch them your idea. Never underestimate how much effort goes into making such connections happen, and keep in mind mind that if a business angel invests, then there is a good chance they will ask you to return the favour at some point, and introduce them to one of your own contacts.

What do you need to include in your business plan?

Once you have secured an introduction, how do you make sure that this potential investor sees what he or she needs from your company? The most important thing for any business looking to secure investment, whether from a business angel, a bank loan, or even from friends or family, is a comprehensive business plan. Business plans are so important because they allow investors to get a clear picture of what the business owner is aiming for.

In your business plan, you will want to detail how much money you need from them and why this is the case. You also need to tell potential investors about your product or service, who it’s aimed at, who is involved in its production, and any protections you have such as copyrights or patents.

Furthermore, your business plan will need to explain exactly how potential investors can make their money back with appropriate projections on sales revenue and growth rates over time .

Depending on whether or not you already have funding lined up (or indeed if there has been any revenue generated), include any investment terms that may be applicable as well as details of other sources of income available should things go wrong. If applicable, then provide some information about your personal finances and any potential conflicts of interest.

As well as providing a comprehensive picture for investors, you also want to make sure that they can understand exactly what it is you are offering them in return should they choose to invest their money with your company.

If the business angel has an equity stake in the business, then how much will this be worth at what point during the life cycle of the company? In other words, when do they get their money back? What kind of ownership percentage will give them access to dividends or share buybacks if these become available? How long before such payments occur from the start up date? Are there any penalties attached if part way through development you decide not to go ahead with whatever product/service you are selling?

The answers to these questions and more should be included in your business plan.

Finally, don’t forget about any legal requirements such as having your document reviewed by a lawyer before presenting it, because if you do not have everything right here then nothing will be able to save you when you enter the proverbial dragon’s den.

What do you need to include in your investment pitch?

The next (and often most nerve-wracking stage) is pitching your business to potential business angels. Hopefully they will have already seen your business plan and invited you to pitch to them off the back of what they’ve seen, but it may also be that they know nothing about your business. Either way, getting the investment pitch right is pivotal in securing the investment your business needs. Here is everything you need to know about the investment pitch:

Your pitch needs to be very focused and include exactly what you would like the business angel to provide. It should also detail why your company is a good investment, how it will grow in value over time (your projected growth path), and of course any revenue projections you have.

If possible try not to leave anything out because this could mean that they get the wrong impression of your idea or business model right from the start, and may never take another look at you again. Remember though, if there are some aspects about either yourself or your venture which might make potential investors wary, then don’t hesitate to mention them upfront. Being open and honest with them upfront means these minor issues can potentially be fixed before they become a major problem further down the line.

Including client and customer testimonials in your pitch is always a good idea as it shows that there are already people out there willing to pay for your product or service. Use this as an opportunity to give the investors something they can relate to.

If applicable, provide some information about how much money has been spent on development up until now and detail any patents or other forms of protection that have been obtained along the way. This should be accompanied with a list of references who can vouch for these claims in case anyone wants additional proof later on. Try not to try anything overly fancy here though because investors don’t want ‘fluff’ – all they’re interested in is what you’re proposing and the likelihood of it succeeding.

Some business angels may request a ‘due diligence’ process, meaning they want to check everything out themselves before they hand over any money – this can be another nerve-wracking part of the whole experience because if even one small aspect doesn’t match up then that could leave them thinking there’s something not quite right about your venture as a whole.

However, don’t feel like this has to be all doom and gloom; make sure you remember why someone would want to invest in your company. Do whatever possible to convince them that you will bring returns on their investment sooner rather than later, meaning that everyone will walk away a winner.

What are the potential downsides of business angels?

Although business angels can be incredibly beneficial to a growing company, they are not without their own downsides. Here are some things that you should consider when thinking about whether or not to approach one:

With the potential upside being much greater, angel investors will naturally want a lot more in return for their investment. This could mean them asking for control of your business which might just take it off in another direction entirely and away from where you wanted it to go. This is why due diligence is something you always need to remember because if an investor spots anything they don’t like then all bets (and potentially your whole venture) may well be off.

Business angels tend to look at companies as investments rather than long-term partners – this means that if your company doesn’t make an immediate profit, then it might be a lot harder to get their attention again. One way around this is by offering them something that other businesses cannot provide. For example, if you own exclusive rights or distribution licenses which otherwise wouldn’t exist in the market, then they will see how important and unique these are and will be more likely to invest.

What are some common alternative sources of business funding?

Before you definitely decide on a business angel, there are some common alternatives that might be worth looking into first:

Business loans

Although the interest rates will vary depending on your circumstances and where you apply for the loan (e.g., a bank or alternative lender), in general business loans can be a great way to fund your business. They are relatively easy to obtain, and there are various options available depending on your business’ needs. Just remember that business loans usually come with strict repayment conditions so make sure you’re prepared before signing any dotted lines.

Crowdfunding

This has become increasingly popular among startups over recent years because rather than having one investor who could potentially hold all of the cards, this model allows anyone with an internet connection to invest. This means that the risk is spread among a much larger group of people, and if one investor decides they don’t want to come on board anymore then you won’t lose them all.

To sum up

In the end, business angels can be a great source of investment for any company that is looking to expand. However, as with all things in life it’s not without its own flaws and downfalls which you need to keep an eye out for – will your venture really benefit from this kind of money or do you have other options available? If anything does go wrong then remember there are always going to be alternatives so not to give up or be too disheartened.

The post What is a business angel? – The ultimate guide to securing investment appeared first on Real Business.

In a hypercompetitive world, one of the few ways a startup can stand out from the crowd is to be more innovative.

Better techniques, smarter delivery, clever products, and unique services can all help you gain a competitive edge over your well-funded and more experienced rivals.

A combination of innovation and risk-taking has helped companies in Silicon Valley conquer the world. British startups need to adopt a similar mindset if they hope to stake a claim in their industry before a well-funded foreign competitor soaks up the market share in their region.

The UK government is well aware of the need for innovation to help local startups survive. Since 2000, the government has been incentivising innovation in the British economy with specialised R&D tax credits.

Here’s how you can use the government’s R&D tax credit scheme as a launchpad for your new business:

Understanding the R&D tax credit scheme

Although the government’s R&D tax credit scheme isn’t complicated, a lack of awareness and certain misconceptions have prevented many businesses from seeking claims under this program.

As a startup founder, it’s worth taking a closer look at how this scheme can benefit your company. Small and medium-sized British enterprises can claim up to 230 per cent of eligible R&D costs in tax credits.

These credits can help offset the corporate tax a small company has to pay every financial year. Even loss-making companies can claim 14.5 per cent of surrenderable losses to offset tax liabilities.

A closer look and thorough due diligence could help you streamline your tax costs and boost profits.

Hire professionals

Tax professionals and R&D tax credits specialists can help you get the maximum amount of benefit from this scheme. Self-service platforms such as Tax Cloud will help you to identify eligible costs, estimate your R&D expenses and file a claim, whilst also giving you access to R&D tax credit experts.

As a small startup, an easy-to-use and affordable online platform like this can help you claim R&D tax credits without needing to hire an army of tax specialists, lawyers and accountants.

However, a professional R&D tax service will also make the claiming process faster and easier, so you can focus on what matters: Building your company.

Invest for the long-term

In his critically acclaimed podcast “Masters of Scale”, LinkedIn co-founder and Greylock partner, Reid Hoffman, said there are two ways to scale a startup: The easy way and the hard way.

The hard way to scale a startup is to create a product and invest a lot of time and money into marketing it. Your efforts in marketing will help you create revenues that can be used to improve the product. In other words, you invest in creating demand.

Reid believes a better, easier, approach is to invest in the product so that demand flows organically. Time, effort, and money spent on research and development will help you create a product or service that is miles better than anyone else’s.

These investments in R&D and technical experiments will not give you instant payoffs, but they will help you create self-sustaining demand in the long-term.

With the government’s R&D tax credits scheme, the cost of investing in science and technology are minimised. These credits support your efforts to make improvements and redefine your products.

Ultimately, the intellectual property and experience your team gains from R&D projects will form the base of your competitive advantage.

These are long-term, durable assets that will generate demand and profits, helping you grow from a tiny startup into a multinational behemoth. Take advantage of this scheme to grow your business over the long-term.

The post How to Grow your Innovative Startup into a Business Eligible for R&D Tax Credits appeared first on Real Business.

Owning a franchise is a goal for many aspiring business people and entrepreneurs. By opening a franchise, you get access to an already successful business model, a business plan that you can always refer to, and an enthusiastic client base ready and waiting to support you as you open your doors.  

But what puts many potential franchise owners off is the cost of financing a franchise. Typically, there are usually hefty startup fees involved, as well as monthly payments to the franchise. This, on top of rent, employee salaries, and utilities, can be very daunting for a first-time business owner.

But the good news is that even if you have no money of your own to invest in your dream franchise, there are many solutions available to you, and in this article, we’ll explore them!

Zero cost franchises

Believe it or not, there are many franchises out there that don’t have any start-up costs. Instead, if you meet the requirements, the franchise itself will take care of all start-up costs for you. Sounds ideal, right? Well, when looking for zero cost franchises, you need to be well aware of the scams out there and keep in mind that while they don’t have start-up costs, many of them will require large monthly payments when you’re up and running.

However, there are some decent zero cost franchises out there. Just take your time finding them, and remember to read all of the small print before signing off on anything. 

Government funding

In the UK, we are lucky enough to have a government that offers funding for those wanting to start their own businesses (should you meet the criteria). Of course, you’ll need to have all the business paperwork in place before you start the application process, as well as pass a credit check.

The great thing about government-backed funding is that they offer you support and advice along the way. But it is often very difficult to obtain this funding, even if you are eligible. So the best thing you can do is send your application through the government portal and hope for the best.

Borrowing from family and friends

Depending on the financial situations of your family and friends, you could always look at asking them for an investment amount which you could pay back to them over an agreed-upon time frame. You could also make a crowdfunding campaign in which anyone on your social media pages would have the opportunity to either donate or invest.

That being said, it is not always a good idea to mix friendships and business. If you cannot pay your friends and family members back, you could find yourself in a rather sticky situation. 

Business investor

Seeking out individual business investors could be a great way to help you get started with your franchise as soon as possible. Like with government backing, investors will be able to offer sound advice as they usually have in-depth knowledge about running a business. 

Keep in mind that the finance won’t simply be handed over to you. In exchange for the investment, the investor will expect to receive a portion of your profits. Therefore, a contract should always be signed between the two parties. You also may have to provide them with regular updates on how things are panning out in the business.

There is a risk involved with this process as the investor could pull out at any time that he deems your business not worthy of their investment.

Bank finance

Obtaining finance for your franchise from a bank is often your best option. Most banks are keen to lend against franchises as they are usually a relatively low-risk business model, and many banks in the UK already have close working relationships with certain franchises. Most banks would prefer to lend to you if you already had some capital to work with, but the fact that you’re interested in financing a franchise and not a brand new business model will definitely work in your favour. If you currently own your home, the bank may show interest in holding your mortgage as a surety. Other assets may be useful in this situation, but be very thoughtful before offering up your home or other assets as surety. This is because there is no guarantee that your franchise will be a financial success.

Choosing the right bank is very important, but you can always speak to a few before settling on which bank you want to obtain a business loan from. It’s helpful to note that most high street banks, including Lloyds and Natwest, have specialised and dedicated franchise departments.

How do I give myself the best chance of getting my finance approved

No matter which of the above routes you decide to take in getting finance for your franchise, the below points will work in your favour when getting the finance approved:

• Have an in-depth knowledge and passion for the franchise that you plan on buying.
• Have evidence of relevant industry experience.
• Have a good credit score.
• Have a detailed business plan.
• You have a home or other assets that you could offer up as surety.

It’s also important that you do extensive research so that you know exactly how much you’ll need to borrow. Borrowing too little could be problematic logistically, but you may find it difficult to pay back your loan every month if you borrow too much. Remember to speak to your franchisor, as they should be able to provide you with an accurate figure for the costs involved in starting up your franchise.

While it is possible to finance a franchise with no money of your own, it is a risk. Ideally, you should have some money of your own to put into the business should you have a slow month or to lower the amount that you’ll need to borrow from lenders. See what you can do in raising capital by saving or even selling unused assets.

The post How to finance a franchise with no money appeared first on Real Business.

With the coronavirus business interruption loan scheme (CBILS)Application deadline fast approaching, it’s the last chance for businesses to apply and benefit from the loan. Although there are many accredited lenders for”CBILS now,’selecting the correct lender to’secureA loan can be a minefield.

We speak to Mark Ridley, director of sales at?Grow Funding?on how businesses that weren’t supported by their banks can still get the help they need.

What is”CBILS, and how can I apply for it?

Due to the COVID-19 outbreak the government decided to provide financial support to business owners, across the UK, who are losing revenue and have seen their cashflow disrupted due to the pandemic.

CBILS was initially set up with only the High Street Banks offering CBILS. Now a wider number of alternative lenders can offer the scheme.

“At Grow Funding, we have helped many businesses that were not supported by their bank. In some instances, we have arranged more than one CBILS loan for a client,” Mark Ridley tells Real Business. “In some cases, we found that our clients hadn?t even heard of CBILS, or that they could have multiple CBILS from different lenders, depending on their annual turnover.”

Grow Funding is an independent commercial finance broker that has quickly adapted to serve businesses with the knowledge and financial support they need to make it through the pandemic. It is now offering a free CBILS review to any business owner whose company’s turnover is between £300k to £45m.

To date, Grow Funding has helped more than 50 companies by securing them over £10m of CBILS.

“We want to establish relationships with these business owners, talking to them about their options for commercial finance to not just keep their businesses afloat, but to help grow them too. People say that, but you have to demonstrate that with action,” Ridley adds.

“No one knew there was going to be another lockdown. Already CBILS has been extended twice. There’s a lot of uncertainty now, which is why we help businesses with their research and solutions.”

CBILS is designed to help otherwise thriving businesses survive the shock of the pandemic. CBILS allows these businesses to apply for funds based on a portion of their turnover or their liquidity needs for the next 18 months.

At some point, businesses need to operate on their own, without any additional support, Ridley explains. “Until then, we can help them find that support. And once they can run on their own, that’s when we can really help people find sustainable ways to finance their businesses for growth.”

“Businesses need to use this money to make more money, not just to prop up the business and pay the bills. They need to pay this loan back in the future, and to be in a positive position.”

Covid-19 support schemes in numbers

• Recent HM Treasury figures reveal that Covid-19 support schemes back nearly 1.5 million businesses across the UK.
• The Bounce Back Loan Scheme (BBLS) supports almost 1.4 million small and micro businesses affected by the pandemic – many of which now have the option of ?topping up” existing facilities following the scheme extension.
• The Coronavirus Business Interruption Loan Scheme (CBILS) has backed over 77,900 businesses with financing since launching in March 2020.
• 658 larger businesses have been supported by the Coronavirus Large Business Interruption Loan Scheme (CLBILS).
• There are 28 lenders accredited to the BBL Scheme, with most businesses having an existing relationship with one of these firms. 111 lenders are accredited to the CBIL scheme.
• 99% of SMEs with a business bank account are with a provider that offers Bounce Back Loans.
• Following the extension of the coronavirus lending schemes, SMEs can now ‘top up’ their Bounce Back Loan to the maximum value of £50,000, or if lower, 25% of the turnover they declared when they first applied.
• Businesses are encouraged to contact their lender if they wish to access these additional funds from their existing loan.

Government-backed loans are just one part of the industry’s plan to support businesses across the UK. Lenders continue to provide a range of additional measures, including working capital extensions, overdraft extensions and capital repayment holidays.

To find out more about how Grow Funding can help your business get the right financial support visit their website: www.growfunding.co.uk.

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Speedinvest’s Managing Partner, Oliver Holle tells readers how to choose a ‘follow on’ investor…

Let me set the scene. You?re running a fully-fledged business with employees on your payroll and a paying customer base. You?re on an upward trajectory, investing in your growth. Over time, your cash runway is running its course. Your existing investors may be business angels or specialised seed funds, neither would be able to lead the next round. It’s time to raise some money!

The good news: the private investment market has never been more competitive, with more VCs raising funds than ever. But with the global economic situation worsening, potentially tough business conditions await. Choosing the right follow-on investor could be crucial to the long-term prosperity of your business.

Investors examine businesses through a lens of extensive fund management experience and expertise in the field, with a team that will rigorously assess you on your numbers. Therefore, it makes sense to assess your investors with the same rigour.

In a best case, your investors” vision can completely change the trajectory of your business. With proper advice and influential connections, a leading investor can facilitate the transition from a good product-market fit to a fast-growing business machine. Still, the terms of the investment matter a lot. The valuation they put on your company can dictate your media attention and how you are viewed by future investors. The deal terms they ask for can directly affect your cap table attractiveness, which, in turn, could be the dealbreaker in your next funding round and possibly even the timing of your exit.

In a worst case scenario, your follow-on investor could be debilitating, by pausing your growth or vetoing strategic decisions. They could even kick you out of the business you founded, if you give out too much power.

Let’s break down a potential investment into three aspects for you to consider: the firm, the partner and the deal itself.

1.The firm

There is no ?typical” follow-on investor, but in broad terms, they tend to have deeper pockets than specialist seed or angel investors. As a result, most follow-on investors tend to be an institution (as opposed to an individual), and therefore will have its own structures, rules and protocols for you to consider.

If a VC has raised money recently, it will have a greater availability of capital, and more time to invest and reinvest. On the other hand, the more companies in the VC portfolio, the less significant your business will be.

Choosing a VC with demonstrable expertise in your field can be important if you’re looking for a more active partner. Ultimately, the best proof of an investor’s quality are tangible results. No one can predict the future, so the next best thing is past results – which should be easy enough to find.

Similar to other fields of finance, household names in VC are top-performing and well-run institutions. In our industry, brand is cultivated by reputation, media attention and other forms of publicity – often for the star companies the fund has backed. In turn, media attention comes with million-dollar exits and unicorn valuation rounds. Another proxy for performance are any co-investors that the firm has partnered with, showing reputation within the industry. A VC with a strong network is hugely beneficial, and can facilitate the introduction to future investors or partners.

Finally, it’s worth finding out how the VC is run. Are there any internal power dynamics that will affect you” Are decisions made in a majoritarian, consensus or veto system” How fast or slow is the process” A couple of questions never hurt.

2. The investor

Along with selecting a VC firm, you will also be choosing a dedicated Partner. This is the person who will advocate for your company within the fund and make sure you get the (human and financial) resources you need and deserve. So forming a strong and meaningful relationship with them from the beginning is key. It is not a coincidence that they are called Partners; venture capital is a people business.

Ensuring there is a good founder-investor fit is one aspect of this – chemistry and cultural fit can significantly impact your collaboration in the coming years, so put the hours into building relationships with potential investors as far in advance as possible. Beyond this personal relationship, however, is going to be their standing within your business. You want a partner who is going to be vocal and active in your boardroom discussions – look for that passion and commitment if you can.

More important than anything is Partner experience; it’s not the case that you must choose an investor with a doctorate in your specific field, or 25+ years” experience, but it is crucial that they are fluent in your technicals. The VC world is dominated by its own language and can feel impenetrable, so take references and ask people you trust about potential investors. Don?t rely on the title and LinkedIn profile.

3. The deal

Finally, it’s the deal itself. The key here is the most obvious piece of advice: keep your eyes open and read the term sheet closely. You do not want any last minute surprises.

It is a top priority to be careful who to take on your cap table; in order to safeguard your ownership and control in the future, term sheet negotiations are critical. My advice: negotiate all critical clauses before you sign that paper – afterwards, power dynamics typically shift to the investor. Be careful with performance clauses – ensure you align behind realistic goals with appropriate investor/founder incentives, and similarly, consider your valuation. Raising finance is a continuous game, not a single point in time – unrealistic valuations will cause you problems in the long run.

Conclusion

Despite the caution and warnings I’ve laid out here, I would still encourage founders to view the process of raising money optimistically. In my experience, the world of European VC is friendly and supportive. Just reciprocate the exhaustive due diligence your prospective investors do on your company, as you are not the only buyer in this transaction.

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What does it take to get the world’s richest man to invest in your startup” No?doubt these words have been on the lips of many early stage business owners following the news that Amazon founder, Jeff Bezos, has made an investment in a young UK tech firm…

On the receiving end of Bezos’s funds is a company called Beacon?that specialises in offering “digital freight forwarding and supply chain finance.” Over the weekend, the startup announced it had raised in excess of $15m in Series A fundraising from investors including the aforementioned Amazon founder. But how did this early-stage business, started by two ex-Uber executives, gain his interest?

What Beacon (appears) to offer the market

Beacon seeks to make the global transportation of products across borders easier. Bezos, at the helm of a global e-commerce titan, Amazon, understands the challenges of supply chain management and the import/export economy firsthand. And if there’s new tech out there that can make the process more efficient, all the better for his business.

Using a combination of AI and other technologies, Beacon’s service irons out the micro issues for businesses transporting their goods globally, including streamlining the transportation of products from factories to ports and providing the paperwork necessary for exportation.

Offering international services across the freight sector including by air ocean and land, the real USP of Beacon is its single platform usage. Their technology allows global deliveries to be seen in real time, it also provides data on shipping costs and prices while its machine learning tools optimise routes and transport processes to find the most efficient methods for its users.

Another key factor that makes Beacon stand out is its ability to offer ‘fast finance’. The firm says it can offer finance within 72 hours to importers, who often get financially squeezed by having to pay suppliers before their goods?arrive.

Why Bezos is interested

Bezos’s reasons for investing in Beacon are clear. Not only is international trade fraught with transportation impediments such as delays at borders caused by the bureaucracy of goods and documentation checks as well as cash flow bottlenecks, Brexit and the ensuing coronavirus crisis have only made the sector’s chronic issues worse, meaning that more businesses will flock to solutions providers that promise to make operations easier.

Best case scenario, these macro factors could boost Beacon’s revenue, (sources close to the firm say they expect a five-fold growth this year as businesses seek to improve their logistics following COVID-19), all which could result in a great ROI for Bezos.

With coronavirus shutting down manufacturing hubs across the world, as businesses slowly get back to normal functionality, efficient transportation processes will be even more important to ensure their cash flow health and survival. The same goes for businesses affected by Brexit where import and export businesses will be keen to reduce their chances of delays at ports.

Making your startup more attractive to investment

While Bezos is known for his past investments in startups such as Airbnb, his Midas touch won’t reach every hot new organisation. What young firms starting out can do however, is make themselves the best candidates possible for dynamic investment.

In order to impress dynamic investors, a business needs to appear truly innovative. And if the hype around Beacon can be believed, that’s exactly what they are;

Via it’s one-platform technology, Beacon is disrupting the status quo of global logistics, which dominated by the likes of DHL, have been slow to embrace new technology. Like China’s leap frogging from a lack of banks to the sudden proliferation of digital banking in the early to mid noughties, Beacon has entered the analogue world of global logistics and has disrupted the sector with its technological offering. As an innovator himself who pioneered mainstream e-commerce culture with Amazon, it’s not surprising that Bezos saw Beacon’s global potential.

In this fraught economic climate, investors are looking for problem solvers, and appearing as a disruptive and innovative presence will make you stand out whether your business is enabling more efficient business transactions to take place, or is providing innovative solutions within an industry that requires disruption.

The post Jeff Bezos invests in UK startup: A case study in attracting dynamic investment appeared first on Real Business.