Sometimes it is necessary for a business to raise UK Equity rather than obtaining borrowing. An example would be a tech startup looking to fund the R&D stage of an idea. Often businesses are assessing funding against differing criteria. UK Equity investments have been subdued in recent years and this has been widely reported. The reason though seems to be linked to the relationship between investors and businesses, rather than investors and the economy.
Reports on UK Equity
The Telegraph recently covered off UK Innovation Hub. Research that found personal chemistry was the top consideration when deciding on investors. Yet in October 2017, the same paper reported that financials are key to investors. It would seem the differing perspectives can often cause confusion. In fact, this confusion has arguably the cause for the dip in equity investment in UK Businesses. The internet has borne a new tech-savvy generation that is hungry to monetize tech ideas.
Forbes reported in March that the authors of the Venture Capital and Private Equity Country Attractiveness Index are very cautious about the UK’s attractiveness after Brexit. The main reason for this outlook is the opinion that the UK economy will perform worse and suffer from a lack of talent. These factors would make it harder for UK businesses to perform well therefore less attractive for investment.
British Business Bank
The British Business Bank reported last month that total equity investment increased by 89%. The technology and intellectual property being the largest sectors. It’s clear that if you put macroeconomic reasons aside, that small businesses are presenting ideas better with equity funders becoming less risk-averse.
In conclusion, equity funding is increasing and a real alternative to raising finance. If UK businesses can continue this trend in turning tech ideas into profitable and attractive positions, this will become a growing route to funding. Whatever the performance of the UK economy, each business must present their case on its merits, showing a return for any investor.