Decide if investment is right for you
First you have to decide if raising investment is right for you and your business. Make sure you consider it fully as investment will allow you to grow.
Secondly, if you are an early stage company, do as much as you can to prove your business model and the potential for your business before approaching any Investors. The more you do to prove that you will achieve the sales you are projecting, the stronger your negotiating position.
Before putting yourself in front of any potential Investors make sure you are fully prepared.
Your business plan must be bullet-proof, your investment proposal well thought out and your presentation rehearsed, practiced and polished until it shines.
To do this you need to know the questions the Investors are going to ask – and you need to know the answers. But not only that, you need to know why they are the answers, and why they are the answers that the Investors want to hear.
Sounds mystical? This is where experience comes in and fortunately we have a range of companies with the skills and the experience to help you get investment ready through a combination of support programmes, mentoring and consultant.
Avoid putting an investment proposal on your own if you have no prior experience. Raising money can be a long complicated process so you want to do it once and do it right.
Meet the Investors
When you feel you are investment ready then it is time to meet the Investors. You need to understand which type of investor deal is best for your proposal. Then, when you do, talk to as many Investors as possible. This will heighten your chances of finding the right Investor for you and improve your position for negotiation if you have more than one interested. Alternatively, you may find that no one Investor will give you the full amount but will be happy to invest alongside others.
If an Investor likes the cut of your ‘investment proposal’ then they will normally invite you to make a presentation. Make sure you fully research the Investor to whom you will be presenting. Find out what deals they have done previously, how they operate and if they have a sector focus. If it is a VC, find out where their money comes from, try to discover any particular decision-making criteria they have. Tailor your presentation to your audience.
Practice your presentation. They will be assessing your ability to ‘front’ your company and sell your business.
Negotiate terms and complete the deal
If you get a thumbs-up then you will be into the nitty gritty of negotiating terms.
Do not be a push-over. The Investor will respect you for fighting your corner. However, avoid haggling over minutiae. Remember you are dealing with a (for now) hypothetical situation and arguing over the share of a business that you have yet to grow. Leave emotion out of it and push for an agreement that will give your business every chance of succeeding.
Get professional assistance. You will need the services of a solicitor to go through the contacts and to help you complete the deal.
Companies often go through various stages of fund raising: starting with friends and family, moving to business angels and venture capital finance along with bank and other debt finance.
The typical terms for the stages of fund raising are seed/proof of concept; early state; growth and expansion.
Sometimes the payments under an investment will be staged with the subsequent payments being released when the company hits certain performance targets. This allows the Investor to mitigate their risk. Committing their investment in stages allows them to monitor the company performance and progress before making full payment.
As a business owner you should therefore be thinking of your business growth in stages. Each round of investment should allow you to reach a higher level. And each time you get there you should be able to list the successes that will show further Investors that your company can make it on to the next stage.