Investment is a key tool for those seeking the capital to start or expand their businesses. With it, you can achieve your ambitions in exchange for shares in your business.
However, obtaining investment doesn’t happen overnight. You need to find the right people and, more importantly, you need to convince them that your business is worth investing in.
Prepared businesses are much more likely to succeed when securing funding and receiving higher amounts of it. So, putting time into your investment readiness is critical for getting the results you want.
We have put together this checklist to help you get investor-ready, so you are fully equipped when an opportunity presents itself.
- Understand your business
- Know how to present yourself
- Pin down what you have to offer
- Know what investment you want
Understand your business
The first step to securing investment is knowing your business and what it is you have to offer. Investors will want to see a solid understanding of your company, and you will need to shine a positive spotlight on the value you can provide. This means answering the following questions.
What is your value proposition?
Your value proposition details why a customer would choose your product or service. Even better if you can highlight what makes it better than the competition. Having a strong proposition matters as it determines how much success your business may have, such as what demand is there for you and how your operations will work accordingly. This should be short, concise and to the point to truly let investors know who you are.
Why do you need investment?
There’s a reason you’re seeking investment – so what is it? This will be one of the first things investors want to know, so be ready to outline your business or growth goals and how investment is required to achieve them.
Do you understand your market?
To have any form of success, there needs to be the demand for your venture. This means having customers and filling gaps in the existing market. Showcase understanding of your target market to highlight who you will be selling to and how. This will make it clear what demand is available for your idea and how you will capture this.
How much investment do you need?
Finally, have an answer to how much investment you need. Knowing this will allow you to identify the right investors and tailor your pitch to ensure you are getting the funding you require. This is where your financial planning will come in, which we’ll discuss further in the next section.
Know how to present yourself
Once you have pinned down what your company has to offer and why you need investment, it is time to focus on the resources you need to showcase your value to investors and get their buy-in. You will need to spend time on this to make sure you get it right and have all the evidence investors expect to see during a funding pitch.
Your business plan is a staple part of any funding you seek, whether it’s debt or equity. This is a formal document that details everything there is to know about your enterprise: the goods and services you offer, your operational model, your predicted growth and strategies you will implement.
Due to the critical role it takes, this must be accurate, detailed and well-presented to ensure readers understand it and believe it will work. Our guide to writing a business plan will help you achieve this.
To complement your business plan, it is essential to include financial information about your company. These are your financial forecasts and cost predictions.
In this plan, you need to identify the costs you expect to incur, including ongoing running costs. You also need to predict your future sales and revenue, as well as detail breakeven points and when profitability is expected.
Pitch deck and presentation
With your business and financial plan behind you, you will need to craft a pitch that gets investors’ attention and convinces them that you are worth funding. This is where your pitch deck and corresponding talking points come in.
Your pitch needs to be tailored according to who you are addressing, but every presentation should adhere to these general rules of practice.
Your pitch needs to be engaging and succinct, with points made effectively and simply. It should provide oversight of your proposition, business models, finances and what you intend to achieve with investment. Avoid being laborious here – remember, you have detailed business plans should an investor want to find out more later down the line. The focus needs to be always on the value your business can offer to the world and the investors.
Pin down what you have to offer
Once you have done the groundwork, you need to consider what you have to offer investors. This means pinning down how much equity you will release in exchange for their potential investment.
To determine your share value, you need a valuation of your business. This should be realistic, fitting both your expectations and having the data behind it to back it up.
To get a valuation, you should look at the values of similar companies within the marketplace as well as check your annual revenue, assets and scalability. You may also get an independent body to carry out the valuation or carry out a discounted cashflow model if pre-revenue.
Remember that the valuation may change as your business and the broader context does, and you need to gauge it with investors.
Any investors you pitch to will want to know the entire team behind your venture. A diverse team with prior success and varied experience are most attractive when it comes to securing funding. They are also one of your assets, so be sure to share any relevant skills and knowledge they may have. Most importantly, you want to prove that your team can achieve the promised results and get a return on investment.
Overall business value
As well as the figure of worth attached to your business, there may be other ways that you can offer value. For example, if you fill a niche in the market that would otherwise leave the public unserved, or if you have excellent growth potential. You may also add value to the local economy and community and offer corporate responsibility or recruitment opportunities. These are worth mentioning as part of your value, as it may help investors engage more with your mission.
Proven track record
Finally, be sure to mention any proven track record you may have that demonstrates your success. This could include minimum viable product (MVP), sales figures, profit margins, fulfilled objectives, industry awards and so on.
Having these ready will back up any claims you make, working to persuade investors that you can meet the goals you have set for yourself and indicate already established worth in the company.
Know what investment you want
Once you have understood how you will pitch your business to your investors and do the research, you need to focus on what you want out of any opportunity. Of course, the main priority is raising enough capital for your venture, but there might be additional elements you need beyond this. Below, we’ve detailed what to consider.
On top of funding, some investment partnerships may offer other benefits, such as mentoring or introduction to valuable contacts. If this is something you want, you will need to find a relevant investor or even specify it in your pitch.
Some investors may want to have a say in your business’s running in exchange for their equity. Again, you need to decide if this is something you want – if it isn’t, you may need to filter your search for ‘silent’ investors.
Not all investors are the same. Firstly, there are different forms of investment (including angel, private equity, venture capitalists and family offices). The type you choose will dictate how the relationship works and the associated benefits. It is essential to understand the differences and know which one fits your business best.
There may also be variation in the areas they specialise in. For example, you may want someone with specific expertise in your industry or you may be happy with someone with more general business experience. This will largely depend on what you want from the relationship beyond finance. Investors within your industry may be better placed to provide advice and get you in touch with relevant contacts and potential customers.
Do remember not to be too selective with what you want from an investor – at the end of the day, your primary concern needs to be to get funding and any offer that provides that should be carefully considered.
The end result
While seeking investment is often the start of a business journey, it is essential to think about the end. Consider the exit strategy you want – what do you hope to gain – exit yourself, buying shares back from the investors, public flotation are just some examples. And what timeline?
By asking these questions, you can ensure you get an agreement that works for you and sets expectations with the investors ahead of time. This will stop you from getting trapped in a deal longer than you want to and clarifies how the relationship will work over time.
There are many things to consider as part of your investor readiness. However, the more prepared you are, the higher your chances of securing adequate funding that fits your objectives. So, it is crucial to plan, craft the documentation you need and determine how both sides will benefit from any investment agreement you secure.
If you need support in getting your business investment ready, we are here to help. Our start-up consultancy and growth finance services aim to equip you with everything you need to successfully obtain funding, whatever your goals may be. We will work with you to establish your value proposition, develop your business plan and define your pitch, before identifying the right approach to investment for your needs and putting you in touch with relevant networks.