You’ve worked hard for this moment: your start-up is ready to go into an investment round. Fame and fortune awaits (probably) and your business will start to accelerate to the next level.
Well, probably. Data shows that only 1 in 10 start-ups receive the funding they need to keep going after five years, and even after that, a huge number don’t receive a second stage of funding, whether that be angel investment or series A.
You may think you have everything ready, but once you have launched – announcing it online, speaking to your network, sending out your pitch deck – it is very difficult to go back and change anything.
That’s why it is absolutely critical to get everything, even the things that you don’t think are important. Good investors are like good home buyers: they are going to do everything they can to look under the carpets and in your loft to find things wrong.
Why is this important?
If your investment preparation is anything like most start-ups, it has probably been exhausting already. Preparing business plans, financial documents, 5-year predictions…the paperwork goes on.
But investment is not purely about the financials. You also need to consider your brand reputation, which takes forever to build and just one moment to destroy.
Take Ratner’s jewellery chain for example. Just one comment by their founder, Gerald Ratner, had a direct impact on the total collapse of the business, which never recovered.
The last thing you want is to start speaking to the investment world when you are not ready. That is why we have put together this pre-investment checklist: so hit the pause button, and start running through this list to ensure you are completely ready.
You’ve got a solid brand story
Simply wanting to turnover more money with a higher profit margin is not enough to turn an investor’s head. Every business wants to make money! It’s not a story that they can buy into.
Have a think about what makes you smile in the office and start exploring that. Your brand story should permeate through every pore of your business, from your social media, your newsletter, your website, and your staff. Because yes, investors will be checking them all.
You have the right team
People matter. Not having the right team in place can be catastrophic for a business, especially one that is looking to accelerate fast. If you are not sure that you have the right people, or even the right job titles, in your start-up then you need to think about that before you go for investment.
It could be that recruiting additional people for new roles is part of your investment plan, and that’s great. But if you don’t have the right people making those hiring decisions in the first place, you could quickly build a company culture that doesn’t work. And speaking of company culture…
You have a sustainability and diversity policy
In 2020, if you don’t have an outlined policy on how your company is committed to being more sustainable and more diverse (usually in two different policies), then you are behind the times. Investors will want to align themselves to businesses who are considering this, so make sure you do.
You have listened to your market
Investors listen to pitches all day long, all year long. They have heard it all. The last thing they want to receive is a poorly thought-through business idea that hasn’t even talked to its target market.
Whether you are pre-revenue or not, there is no excuse for not consulting the market. Find people, take them for a coffee, ask questions and listen. Ask your customers or clients for direct feedback. See what your competitors are doing! All of this will ensure your investment pitch meets the needs of your industry.
Your pitch deck isn’t boring
You need to inform and not bore, and there is a difference. A good investment pitch deck is about 10-15 slides – yes, that’s really all you need. Anything longer and that’s your business case, something to be shared with investors who have shown high interest.
But if you send a 47 slide deck to someone who isn’t warmly interest – or even worse, you’ve sent it cold – then you can be pretty sure that they’ll never read it.
You know what you want to do with the money
Investors want specifics, and that includes what you are going to do with their money. If you just have a vague feeling that more money in the bank will just ‘help’ with everything, you are going to find your coffers empty for much longer.
In your financial plan, clearly indicate what company activities will be paid for by investment funds, what by revenue, and what by initial cash reserves.
You have a safety net
Investment rounds can take a long time – far longer than you would think. In some cases, an investment cycle from initial reach out to receiving funds can be 18 months or longer. That means you cannot sit on your laurels and not worry about driving revenue targets.
Sadly, even with all these things in hand, no one can guarantee investment – however, this pre-investment list for start-ups gives you the best chance to put your best foot forward.
Disagree with me? Email Emily now!