Securing investment is a challenge for any business owner – but it is a vital step on the road to growth.
Getting that investment, though, can be tricky – particularly when you are looking for equity deals rather than loans. You need to find the right people to approach, and you need to give them a series of great reasons why yours is the business in which they should invest. We have compiled a list of five steps to help you get the cash you need.
1. Work out what you need
The first and perhaps most important step on the route to investment is to work out what you need. You won’t be able to persuade investors that they should part with their cash unless you have a very firm idea of how much you are looking for, and what you need it for. When you first approach investors you probably only need to give a high level overview (for example, we need £50,000 to make two hires), but you should be prepared to back up your figures in more detail in your business plan.
2. Build a great presentation
Potential investors are likely to see dozens of presentations every week. Yours needs to stand out. It is generally thought that an effective presentation ought to be around 15 slides long, and should give investors an irresistible taste of what your business will achieve. The best presentations give a sense of kinetic energy – they suggest that the business is on its way to success, with or without the involvement of the investor to whom you are pitching. You also need to make sure that you provide a clear exit strategy for your potential investors. Read our guide to building a great investment presentation for more information.
3. Identify investors
Many small businesses are put off seeking equity investment simply because they cannot identify potential investors. Clearly, this can be a challenge. There is a sense that you might not have the necessary contacts, or that you don’t know where to look. Clearly, personal connections are ideal, and if you have them you should use them. But even if you don’t, identifying investors is still possible. There are several ‘angel investor’ associations across the UK, and each of these keeps directories of their members. You can search these directories (generally for a fee) to find individuals or investing groups that specialise in your area of business or are based nearby.
4. Demonstrate your progress
A great idea is clearly the most important element of your pitch – but it is not the only thing that you should be concentrating on. Often, investors will want to see proof that you can deliver, and this means that you will need to provide information on your existing ‘traction’. Investors want to see whether there is an appetite for your products or services, and you need to prove this with hard figures. Metrics like sales volumes, customer base, and turnover will be vital in persuading potential investors to get involved.
5. Be clear on the terms
Finally, it is vital that you think carefully not only about what you are asking for, but also what you are offering. How much equity are you willing to part with? What will be the terms of the deal? What day-to-day role will the investors take on, if any? You need to be absolutely sure of the practicalities of your deal, and it is vitally important that you seek legal advice before entering into any such arrangement.