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You MUST
1. Be committed
Totally, wholly, unquestionably, inextricably committed to your business. Financially and personally.
Investors do not back part-timers.
2. Not be overly protective
Businesses are not successful because of an idea alone. There is a strong tendency amongst early stage entrepreneurs to think that their idea is gold dust and that everybody they tell will try to copy it. Application, aptitude and constant innovation make a business successful not the original idea.
There is also a real tendency amongst business owners to want to retain 100% ownership. The ‘It’s my baby’ syndrome leads to stunted several year old baby sized businesses… at best….
Oh and VCs do not sign NDAs. If you have something that is of unique intellectual property, do not share it, just explain the benefits.
3. Be prepared… in everything you do
Read around the subject. Do your research. Understand the process and the different types of Investors. Research your potential Investors. Do not produce sloppy business plans. Do not make spelling mistakes. Practice your pitch again and again and again.
You are giving Investors an insight into how you run your business and how you deal with your clients and partners. They need to be impressed.
Your Business MUST
4. Be focused
Have a laser sharp focus on what you offer and to whom. Do not bolt on additional products and services unnecessarily. You need to establish some proof of concept and the narrower and more focused your offering the smaller budget you need to get to proof of concept.
Proof of concept and tangible evidence unlock capital. Not ideas for more services and/or products.
5. Have a Management Team
It does not have to look like the board for Unilever or even be full time employees but you do need to make sure that you, your colleagues and/or advisors can demonstrate skills in certain core competencies i.e. Sales & Marketing, Finance, Operations, Technical.
An experienced individual from a relevant sector acting as Chairman will also really help.
6. Properly prepared financial
Investors focus on numbers. Make sure that all your financial information is professionally and properly prepared. Know your PnL from your Balance Sheet and Cashflow. If you do not, get a professional to do it for you. You need, as a company, to demonstrate competence with the financials.
Investors are not going to give money to businesses that do not know how to manage it.
7. Be clear on why it will succeed
Understand your competitive advantage. Wherever possible give evidence of this. Think ‘proof of concept’, again.
Do not ignore competition – analyse it. All businesses with good ideas will have competitors sooner or later.
But remember, you cannot see the future, plans change so demonstrate that you have the understanding and flexibility to minimise risks and maximise chances of success.
For Your Potential Investors, You MUST
8. Get them excited… and sell to them!
Investors are human beings not robots. They have family, go on holiday and have hobbies and interests! You need to excite them. Paint them a picture of the vision. This is a sales job.
9. Put yourself in their shoes
Imagine you had several hundred thousand pounds to lend to somebody with little to no guarantees that you will get it back unless the business is successful. What would you want to know? This will help you to be more objective and dispassionate in the assessment of your proposal. You will also begin to understand an Investor’s cynicism.
10. Be clear on the plans for exit(s)
Bank debt will have repayment terms and so you need to make sure that you are happy with them.
Equity investments are illiquid. An Investor cannot cash them in whenever they like so they need some indication as to when and how they are going to get the money back so that they can assess the likelihood of that happening.