Raising your first round of investment can feel like a mix of job interview, first date and exam. Founders often assume it all comes down to the idea. In reality, early investors are asking three questions: do I believe in this founder, is there a real opportunity here, and does this person understand how their business will make money?

The first two come down to you. The third is where preparation pays off.

Start with the question: do you need investment at all?

Outside investment isn't the only route, and it isn't always the best one. Before you start knocking on doors, consider the alternatives:

  • Customer revenue: the cheapest money there is, and the strongest proof your business works.
  • Grants: schemes such as Innovate UK competitions can fund research and development without giving away equity.
  • Loans: the government-backed Start Up Loans scheme and traditional lenders can suit businesses with steady, predictable cash flow.
  • Equity investment: selling a share of your company to angels, crowdfunding backers or venture capital funds, in exchange for capital and often expertise.

Equity makes most sense when you need to move quickly, the opportunity is large and you can't fund the growth any other way. It's a long-term partnership, so it's worth being sure it's the right one.

Who is your first investor likely to be?

For most UK start-ups, first money comes from one of four places:

  1. Friends and family: quick and supportive, but treat it as formally as any other investment. Clear paperwork protects relationships as well as money.
  2. Angel investors: experienced individuals investing their own money, often with sector knowledge and useful contacts. Angel networks and syndicates can help you reach several at once.
  3. Equity crowdfunding: platforms that let many smaller investors back your business, useful if you have a loyal customer base or a consumer brand.
  4. Early-stage venture capital: pre-seed and seed funds typically back businesses with high growth potential and some early traction.

Many angels will also want to know whether the company qualifies for the government's SEIS or EIS schemes, which give investors tax relief. It's worth checking your eligibility early, as it can make your round noticeably more attractive.

Your business plan: telling the story

A business plan isn't a 60-page document gathering dust. It's the clear, credible story of your business, and it usually becomes your pitch deck. It should answer:

  • The problem: what pain are you solving, and for whom?
  • The solution: what you do, and why it's better than the alternatives.
  • The market: how big the opportunity is, backed by realistic research rather than "if we get 1% of a £10 billion market..."
  • Traction: customers, revenue, pilots, waiting lists. Evidence beats enthusiasm.
  • The team: why you are the people to pull this off.
  • The ask: how much you're raising, what you'll spend it on and what it will achieve.

Investors see a lot of pitches. The ones that stand out are clear, honest about risks and focused on what the money will unlock.

Your financial model: proving the story

If the business plan is the story, the financial model is the proof. It's often where early-stage founders are weakest, and investors notice straight away.

A good financial model doesn't try to predict the future perfectly. Nobody expects that. Instead, it shows that you understand the moving parts of your business. It should include:

  • Clear assumptions: pricing, customer growth, conversion rates, hiring and costs, all laid out so investors can see (and challenge) your thinking.
  • Revenue and cost forecasts: typically three to five years, with more detail in the first 12 to 24 months.
  • Cash flow: when money actually comes in and goes out, and how long your runway lasts.
  • Unit economics: what it costs to win a customer compared with what they're worth over time.
  • Use of funds: exactly how the investment will be spent and which milestones it gets you to.
  • Scenarios: what happens if sales take twice as long, or costs run higher than planned.

A well-built model also answers the question every investor asks: how much do you really need? Raise too little and you'll be back fundraising before you've hit your milestones. Raise too much and you've given away more of your company than necessary.

Just as importantly, the model is a tool for you. Once the money is in, it becomes the basis for tracking performance and reporting to your new investors.

Getting the rest of your house in order

Before serious conversations begin, investors will want to carry out due diligence. Make it easy for them by having:

  • A tidy cap table showing exactly who owns what.
  • Up-to-date accounts and management information.
  • Key contracts, IP ownership and founder agreements in place.
  • A sensible view on valuation, informed by comparable deals rather than hope.

A well-organised data room signals a well-run business, and it can shave weeks off the process.

Pitching: practise, then practise again

Fundraising is a numbers game. Expect plenty of "no"s before a "yes", and treat each one as feedback. Warm introductions through advisers, accelerators or other founders tend to work far better than cold emails.

Know your numbers inside out. An investor asking about your customer acquisition cost doesn't want you scrolling through a spreadsheet. They want a confident, considered answer, which is much easier when you've built the model yourself or worked closely with the people who did.

How Higginson James can help

This is where we come in. We work with founders to turn a great idea into an investable proposition, including:

  • Business plans: that tell your story clearly and credibly.
  • Financial models: built around your business, with clear assumptions, cash flow forecasts and scenario planning that stand up to investor scrutiny.
  • Investment readiness support: from sense-checking your funding requirement to preparing for due diligence.

We'll make sure that when an investor asks "how does this business make money?", you have a confident answer and the numbers to back it up. Get in touch to arrange a consultation and take the first step towards your first investor.

This article is general information, not advice for your specific business. Please get in touch before acting on anything covered here. Higginson James Limited accepts no liability for any loss arising from reliance on this article.