How accelerators can help their cohorts raise capital with a digital investment platform
Accelerators play a key role in supporting entrepreneurship and innovation by providing companies with the contacts and skills they need to succeed.
As a main driver of the startup ecosystem, accelerators not only help founders validate their ideas, they provide invaluable support for innovation and growth and, very importantly, market and investor access.
Whether an accelerator programme has been set up to connect companies to corporations, drive innovation or create and sustain a local startup ecosystem, one of the main challenges it will usually face is helping companies raise capital.
The amount of funding companies will receive upon leaving an accelerator is a key metric that shareholders look at to judge the efficiency of the programme.
Furthermore, during these unprecedented times, facilitating investor introductions can amount to an additional income stream for accelerators. That income may be vital to programmes struggling to attract funding themselves.
With a secure, FCA-compliant digital platform, accelerators can start promoting deals to investors in days, while supporting their cohorts to attract investment and improving their chances at an exit later on.
What is a digital investment platform?
Digital platforms allow angel investment networks, accelerators and incubators to publish investment opportunities online and promote them to potential investors in a secure and regulated environment. Every deal is hosted on a secure online platform, increasing entrepreneurs’ chances to catch the eye of an investor.
Connecting investors to startups has been pushed online
Increasing travel restrictions due to Covid-19 mean that networking in the early-stage sector has been pushed entirely online— for the first time in our lifetimes.
Accelerator programmes have been operating entirely remotely, and the lack of opportunities for founders and investors to interact in person has often hurt companies’ chances to secure the funding they need.
However, while some have experienced a loss of new investment and value-producing opportunities, others have garnered interest from investors they wouldn’t have otherwise interacted with.
In fact, studies reveal that attracting angel investment online is now more likely that ever. One survey by PWC showed that 98% of HNWIs use the internet every day, with some spending 3 hours a day online.
“All purchasing decisions, whether you’re buying a pair of jeans, a new car or building your investment portfolio, start online with browsing and initial research.” says Oliver Woolley, CEO of Envestors.
Regulatory cover is essential
While many accelerators and angel networks are now holding digital pitching events, many are not aware that they’re taking part in a regulated activity.
Any organisation that is connecting startups to investors needs to be aware of FCA regulation and ensure they are in compliance. One or both of the following may apply:
1. Financial promotions
All financial promotions have to be approved by an individual who holds the relevant FCA authorization. Accelerator programmes may face legal liability for the financial promotions they pass on.
Non-regulated organizations are able to set up pitch events, as long as investors are aware of the challenges and risks associated with early-stage investment and have self-certified as:
- High Net Worth Individuals (HNWI) with an annual income of £100,000 or more;
- Sophisticated Investors (SI), a title for which they qualify if they’ve invested in early-stage businesses in the past two years before the event;
- Corporate investors including private equity firms, family offices and VCs
2. Arranging deals
Accelerators involved in investor matching usually believe that the mere act of connecting a founder to an investor is not regulated.
While you may not be providing investment advice to investors (a regulated activity), you may be guilty of ‘arranging deals’ in investments without regulatory cover.
When you connect startups to investors, you’re doing so to allow them to discuss investment opportunities. Since that may lead to transactions, you’re ‘arranging’ the deal and need to be covered to do so legally.
An investment is never an impulse purchase
A pitch event is not enough to persuade investors. In fact, investing is a carefully considered decision which takes weeks – at best!
Busy accelerators may lack the resources to nurture investors through the buying process. This is where a platform can help.
In order to keep investors engaged before and after pitching events, you have to constantly update them on companies they might be interested in. That’s where a digital system comes in. An online platform can prove to be a persuasive and impactful investor engagement tool.
The right digital investment platform can:
- Support your marketing efforts before the event, helping you pique investors’ interest;
- Keep investors engaged with features like following and automatic company updates;
- Support the due diligence process at an investor’s leisure – without having to prepare and send documents – with a secure dataroom;
- Save time and provide a better experience for investors.
Connected networks can help expedite startup success
With a connected digital platform, accelerators can extend exposure to other partner networks to top up funding for their companies. The platform’s aim is to get your deals in front of angel networks that operate in your sector or region – whoever you decide to present your deals to.
Platforms like Envestors’ own Envestry for Networks provide deal sharing features to make investment easier and quicker.
In practice, the system would allow, say, a cleantech accelerator in Manchester to showcase their deals to a network in London.
“Without platforms such as Envestors we would not have been able to raise the £15m required to expand our business. The 51 private investors who invested under the EIS through Envestors shared a profit of £48m when we sold the company to BP – proof the model works,” David Martell, Founder of Chargemaster says.
The right partner makes all the difference
Helping companies get investment ready, engaging investors, and closing investment.
All these things take time to master and put into practice.
In fact, for accelerators used to connecting founders to investors through face to face meetings and events, the tools and systems required to digitize their whole operations might take a while to pull together.
Having helped over 200 companies raise £100m+, we at Envestors know how to run a digital platform for raising capital.
We bring essential finance and strategic expertise to the table, to help you support your cohorts and find them the right investors and strategic partners.
We’ve used our 15+ years of experience to create a digital tool that will suit your needs. Envestry for Networks is a user-friendly branded marketplace that enables investor groups, accelerators and associations to post and promote investment opportunities to their networks and syndicate deals to a broader network.
We provide access to increased deal flow by promoting deals across multiple networks. Every network chooses which deals they want to share, and investors from other networks are then given access to that deal.
SETsquared is one of the first accelerators and incubators to use Envestry for Networks to connect founders to investors.
‘While we have already supported over 3,500 entrepreneurs since 2002, raising finance is critical for growth and while we had an informal network of investors, we weren’t in a position to really bring investors and entrepreneurs together. We knew that in order to move forward with our vision we would have to go digital’ says Jake Ronay, Investment and Corporate Partnerships Lead at SETsquared.
With Envestry, you have access to deal flow management tools, an on-demand information portal and portfolio management features. The platform will provide constant investor engagement by sending out automated reports on your companies’:
- Product or team development;
- Funding progress;
- Partnerships and interest from customers.
The team at Envestors can guide your through compliance, corporate finance and investor relations. With Envestors you’re not just getting a top-notch digital tool, you’re getting a partner.