Venture capital is money that is provided to seed early-stage, emerging growth companies. Venture capital funds invest in companies in exchange for equity in the companies they invest in, which usually have a novel technology or business model in high technology industries, such as biotechnology and IT. The typical venture capital investment occurs after a seed funding round as the first round of institutional capital to fund growth (also referred to as Series A round) in the interest of generating a return through an eventual exit event, such as an IPO or trade sale of the company. Venture capital is a type of private equity.
venture capital is attractive for new companies with limited operating history that are too small to raise capital in the public markets and have not reached the point where they are able to secure a bank loan or complete a debt offering. In exchange for the high risk that venture capitalists assume by investing in smaller and less mature companies, venture capitalists usually get significant control over company decisions, in addition to a significant portion of the companies’ ownership (and consequently value).
The British Business bank have a check list to see if you are ready for equity investment.
Venture Capital Trust is a government scheme to offering a range of tax reliefs to investors who invest in VCTs
Angel Investors use their own spare financial capacity to make investment in small businesses, generally at the start-up or early stage of development. They usually take shares in return for providing equity finance and seek to use their own experience and contacts to support the growth of the business. Angel investors can invest on their own, but frequently choose to invest in syndicates, enabling them to pool their finance and knowledge, where they can take the lead or a more passive role. Angel investing is the most significant source of investment in start up and early stage businesses seeking equity to grow their business. Angel investing in the UK is taking place in different ways. Whilst many investors still prefer to invest on their own, there is a growing trend towards investing in groups and forming structured or unstructured syndicates, enabling investors to pool their finance. The UK Business Angels Association (UKBAA) is the national trade association representing angel and early stage investment.
The British Business Bank have a useful guide to Angel Finance