Raising investment is rarely easy. Couple that with the current economic climate and raising significant sums becomes even harder. So, how can you give yourself the best possible chance of attracting investors at this time? The good news is that there are some steps you can take to make your proposal stand out. So, if you’re looking into raising finance equity, have a read of our tips below.
You may be the best in the business when it comes to pitching. Or, you may watch others just wishing you had their gift of the gab. The reality is that it doesn’t matter either way if your proposition isn’t investment ready. And that makes sense, right? It’s going to be extremely difficult to convince a would-be investor with charm alone. So, if you want to stand any chance of getting them to back you, they’ll likely need more than a well-rehearsed speech to persuade them.
Some of the absolute necessities to prepare before approaching investors include:
- A valuation,
- A deal structure
- An agreed share price.
- A financial forecast including revenue,
- Historic accounts for at least 5 years where possible
- Your profit and loss from the last full trading year.
If you’ve ever watched The Apprentice, you’ll be aware of the potholes people fall into when preparing their business plans. For those unwitting candidates who take woefully inept plans before Alan Sugar, the unveiling of their inadequacies cane be painfully embarrassing to watch (though, for all the wrong reasons, it’s also quite good fun!). For the sake of real life dealings though, it demonstrates valuable lessons in making sure you know your stuff before you go into any investment meetings.
Your business plan needs to demonstrate that you know the market, its size and potential, as well as the competitors in your field. You need detailed information regarding your product or service, with patents or patent applications where appropriate. It’s also helpful to demonstrate that your management team, regardless of size, can showcase their experience and expertise in the industry, as well as a transparent record of any non-executive directors or board members.
Be realistic and transparent
It’s important to be realistic about your facts and figures. There’s little point in not being transparent as any investor will want to do their homework before they part with their cash. Being transparent can only go in your favour. So, when it comes to matters like your valuation, it must be fair. If you undervalue, or overvalue, what it is that you have to offer you risk being rejected at an early stage. Following a process to arrive at an appropriate valuation will demonstrate an understanding of where you sit within the market, and the potential for growth.
Be aware of regulation
The Financial Conduct Authority (FCA) regulates equity investing in the UK to protect both investors and companies raising finance. In order for you to widely market your investment opportunity, you’re required to gain approval from a firm or individual who has been authorised by the FCA to avoid any potential trouble further down the line. Getting this approval will confirm that your proposal is fair, clear and not misleading, and breaching regulation is a criminal offence which can result in damages being paid.
Once you have your investment opportunity clear, well prepared and regulated, you need to get it in front of potential investors. Some like to take their businesses through accelerator programs, or by presenting at specially organised pitch showcases and fundraising events. There are even a number of online fundraising platforms designed specifically for equity crowdfunding, which certainly helps in a landscape where in-person events are limited. The right route for you will depend on the details of your investment opportunity, and there is no single correct approach. But, you will need to be accessible and be ready to step up at potentially short notice!