When starting a business, you need a few things for success: a great idea and the funding to make it a reality.
For your funding needs, investment is often a fitting solution. With it, you can gain substantial sums to launch your venture in exchange for equity shares. However, the challenge is finding investment opportunities and effectively seizing them when you do.
Having a strong business proposition is the starting step in securing funding, but it is by no means the only factor to consider. Investors likely come across ‘great ideas’ every day, so you need to make sure yours stands out to attract finance.
A few steps should be taken to find investment opportunity and ensure engagement in your pitches. We’ve outlined them below.
- Understand your business
- Know the value of your business
- Have a robust business plan
- Have accurate financial forecasts
- Know what investment you need
- Be ready to pitch
Understand your business
The first step to your search for funding is to understand your business’s proposition and needs entirely. In a pitch, one of the main things investors will want to see is detailed information about your business, including:
- Your value proposition – what you are offering and why it matters.
- Your target market – what gaps you are filling and where demand will come from.
- Your objectives – what goals you want to hit and when as a business.
- Your operations and strategies – how you will serve and generate demand to reach targets.
- Why you need investment – what the funding you secure will help you to achieve.
You need to be able to answer these questions to present an informed view of your business. The better you understand your business and the market, the more likely you are to experience success. Having this knowledge will give investors confidence and trust in your ability to lead your enterprise. This will draw investors towards your idea and boost your chances of success when you approach them.
Know the value of your business
When meeting with a start-up or enterprise seeking growth, investors want to know what they will be getting for their buck. This makes it vital that you know the value of your business and can demonstrate it.
Start by determining your company’s value, using competitor research and financial projections to work out what you are worth. From here, you should identify how much you would expect to receive for what percentage of shares. Remember, investors’ primary concern is getting the best return on their investment possible, so make sure there is profit to be had for all parties.
Aside from the financial value, there may be other value associated with your enterprise, such as for customers, communities and employees. If any of this is relevant, you should include it in your value proposition to encourage investor buy-in.
Once you have calculated your value, be sure to thread this throughout any pitches you hold. By doing this, you will shine a spotlight on your idea and persuade investors that you are worth financing. However, you must also remember to be realistic – investors will quickly flag up any unconvincing claims, which could undermine your efforts.
Have a robust business plan
Before you start your funding search, there is specific documentation you need to create. These documents act as evidence of any claims you make in your pitch and provide investors with detailed information about your business.
A business plan is one of the critical documents you need to craft. It should be the bible of your business, incorporating your proposition, target markets, operational models, competitor research, sales and marketing strategies, management team and finances. While your pitch may provide a very high-level view of these aspects, the plan document is needed should anyone want additional insight into your idea.
Having a robust plan will underpin your business objectives, showing why your idea has merit in the real world and how investment will move you towards your goals. It will also enforce your understanding of your company, so you are prepared for all questions that may come your way.
Have accurate financial forecasts
Alongside your business plan, you need to have accurate financial forecasts founded on actual data. This means looking at any financial information you already have, such as sales, revenue, existing investment, costs and so on, and predicting what your future income and outcome may be.
You will also need to plot factors such as when you expect to turn a profit and breakeven points and how sales and revenue will grow over time. This will help investors see when they can expect a return on their money and at what level.
You should also consider different scenarios which may impact your finances, as this will show that you have given an all-round view with contingencies in place for these. This, alongside realistic projections, will reassure investors of your financial understanding and reliability with their money, making you more attractive as a prospect.
Know what investment you need
Before beginning your mission, you need to know what investment you need. This means the amount you wish to raise, based on your needs and careful planning, as well as any other criteria you hope an investor to meet. For example, some investors may have industry experience which lends to mentoring and guidance, while other start-ups may be looking for more of a silent partner.
Equity can be offered across different funding types, so be aware of the available options and which work best for your business. It is also worth carrying out research to uncover the many investors available and your preferences.
Once you know what you want from the investment, it becomes much easier to know where to look. This will enable you to tailor your pitch to the right investors for you, and ensure you are attracting those that suit your needs.
One way to uncover investment opportunity is to get networking for your business. There are a plethora of networks and events open to entrepreneurs, including industry-specific, gender-exclusive or niche groups. Attending these and talking about your idea is a great way to get yourself out there.
Networking is good practice for a funding pitch, as it forces you to discuss your business in an insightful, positive, and engaging way. Over time, you will determine what people react to most about your venture and use this as the focus on your value proposition.
Through networking, you can also gain valuable contacts for the start of your enterprise and its entire lifespan. While these contacts may not necessarily be investors themselves, they can become allies, partners, customers and suppliers who will help you later. They may also act as introducers to investors, as well as allow you to make a name for yourself in the right circles – which lead to opportunities later.
Be ready to pitch
You never know when a chance to talk to an investor may present itself. It might be a scheduled meeting in some cases, but in others, it could happen during a networking event or a random occurrence in your day. One thing that is for sure is that you need to embrace the opportunity when it appears.
By following the steps we’ve outlined above – specifically, understanding your business and crafting business plans and financial models – you will be ready to go at any time, even with little notice. This could be the key to securing finance or getting forgotten about amidst the abundance of other start-ups seeking funding.
By being prepared in advance, you will naturally attract investment as you will be confident, knowledgeable and informed regarding the value of your idea. These are traits every investor wants to see from an entrepreneur, boosting your chances of success.
The early stages of a new or growing business are equally exciting and challenging, especially when seeking the finance you need to turn your vision into a reality.
Understanding your business’s value and carrying out your due diligence is by far the best thing you can do to attract and secure investment. With increased investor readiness comes better access to the opportunity for investment and enhanced interest, allowing you to get the capital you need for your ambitions.
If you are entering the foray of investment and need guidance, our team of experts are available to support you. We work with start-ups, scale-ups and growth businesses to secure funding, and we want to help you achieve this too.
We help create winning plans, pitches and introduce you to valuable contacts and investors.
Get in touch today to find out more.