Is venture capital right for your tech startup?

Techcelerate is not against investment. Many of our members have raised well and grown fast. But we have also seen tech founders raise money they did not need, from investors who wanted a different outcome from theirs. Raise when it pays, and from the right people. Our guide Raise only when it pays sets out our approach.

VC may suit you if

• The market is large enough to produce a company worth hundreds of millions. Test it with Can you return the fund?
• Speed matters: a competitor or a short window means growing slowly could lose you the market.
• The business needs heavy investment before it can earn money, as in deep tech or some marketplaces.
• You want to build the biggest possible company, and accept the dilution and loss of control that comes with it.
• You are ready for an exit within roughly five to ten years.

VC may not suit you if

• The likely exit is in the tens of millions. That can be a superb outcome for tech founders, but it does not move a VC fund.
• You want to keep control, or to run the company for the long term and take profits.
• The business can grow from its own revenue at a pace that keeps up with the market.
• You need money mainly to find out whether the idea works. Cheaper ways to validate usually exist. See our systematic idea validation guide.

Alternatives to consider

• Bootstrapping. Growing from customer revenue. Slower, but you keep ownership and control. See bootstrapping tech startups.
• Angels. Smaller cheques and often more flexible about the size of exit, especially with SEIS and EIS relief.
• Revenue-based finance. Repaid as a share of revenue. Suits recurring-revenue companies with good margins.
• Venture debt and bank lending. For companies with revenue or recent equity backing; no dilution, but must be repaid.
• Grants and R&D tax relief. Non-dilutive money for innovation, through bodies such as Innovate UK and HMRC’s R&D relief.
• Customers. Pre-sales, annual upfront billing and paid pilots fund growth and prove demand at the same time.
• Skilled volunteers. Members can resource validation, build and go-to-market with skilled volunteers through SkilledUp Life, reducing how much cash they need.

Questions to ask yourselves

1. What exactly would the money let us do that we cannot do now?
2. What outcome do we want in five years, and in ten?
3. How much of the company, and of the decisions, are we willing to give up?
4. How long can we last without raising? Check with the runway calculator and the break-even planner.

General information, not financial, legal or tax advice. Figures marked as rules of thumb vary by fund, sector and market conditions.