Bill Gates, co-founder of Microsoft, once said: ‘we always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten. Don’t let yourself be lulled into inaction’. As the speed of change increases, it becomes ever more true. We see it all around us in every field of both our personal and professional lives.  Every business should always be looking to adapt by evolution, they should also be ready to pivot by revolution in need, or if an opportunity presents itself.

In order to survive, any business must adapt and react to changing circumstances, tastes, and market forces around them. Sometimes just staying ahead of the competition, or even keeping up with them can be enough. Other times something more radical is required.

Whilst early-stage businesses often do not have the same financial and other resources as longer established ones they do have the benefit of having a much leaner management structure. This inevitably translates into start-ups and scale-ups being better able to identify new opportunities and to make much quicker decisions to pursue them.

Continuous improvement and reassessment of your business, the market, and your business model, are all essential in growing your businesses. But growing businesses have much more need for capital than those that are not scaling. Early-stage businesses often only have restricted access to finance or to restricted amounts and this inevitably means that they are required to look for equity investors in order to finance their ambitions.

Where founders source equity investment from often follows a typical route of self-investment or ‘bootstrapping’ from savings or personal borrowings and this is often followed by pre-seed finance raised from friends and family. As a business continues to scale there is often a need to raise finance on a number of occasions and the actual amount raised would increase as the valuation of the business grows and the needs also increase.

The next round for most types of business would be from business angels / HNWIs or from crowdfunding. Which is best very much depends on the sector and the complexity of the business.  In simple terms, crowdfunding is perfect for businesses that are B2C and have products or services that are easily understood by retail investors.  Business angels often bring industry knowledge, or act as ‘smart money’ in other ways, and are often better placed to understand more complex businesses.

Larger fundraising rounds can be perfectly suited to VCs as they typically prefer businesses with real traction and as they have greater access to investment funds than other investors. This enables them to invest larger amounts, and indeed to follow up in any future rounds.  

For any business to grow, and even to survive, adapting to change is a constant requirement. Get this right and frequently the main factor holding the business back can be finance. Choosing the right finance at the right time can be the cornerstone to ensuring that your startup becomes a successful scale-up.

This series of articles follows themes explored in more detail in my new book, Startup to Scaleup : what funders expect at each stage Go to the link to order your copy and use the discount code 10off-start-to-scale to get a 10% discount.