1. Target the right funding source: There is a plethora of ways start-ups can raise cash ranging from family and friends, to bank loans, crowdfunding, angel and venture capital investing and seed investment. “You need to determine which of these sources is most appropriate for your business and ensure you apply for them correctly and professionally,” says Mark Brownridge, director general of the Enterprise Investment Association.
“A lot of SMEs pick all the potential sources, throw jelly at a wall and see what sticks. You need to focus on just one or two.” As part of this do your research on the investors – which businesses have they invested in before, what size and sector, what do they like and don’t like?
2. Prepare presentations carefully: “You don’t need one hour and a huge slide deck to explain what your business model is. Investors want to pick up crucial information in just five to 10 minutes. They want to know what the key idea or product is, how it competes with or changes a market and how it will take off and scale,” says Mark.
“Some start-ups have massive cashflow forecasts and details on what their revenues will look like in five years. Well, at their stage of growth you might as well stick your finger in the wind! You may lose credibility if your plans are too rosy and optimistic and don’t acknowledge potential risks and challenges.”
Luke Lang, co-founder of Crowdcube agrees: “When we began we were careful in our business plan and presentations not to use jargon or rhetoric in front of our investors. Your idea needs to be clear and simple. When it comes to valuations then be balanced and not over ambitious. Investors want to know you have a grasp of your financials such as costs and returns but don’t show financial statements showing wild growth plans!”
3. Define your market potential: There is no point having a great idea or business solution but failing to show an investor that you know who the customers will be and whether there is demand. “Show, by market research, that your idea isn’t niche. That it will make you and the investors’ money,” advises Mark.
Luke believes communication is key. “You need to sell your business as an investment proposition rather than just as a product. Reveal your business narrative to investors, including your own personal story to develop an emotional connection, and de-risk you and your product,” he says. “Demonstrate the traction, progress and momentum you have made by the growth in your social media audience, app downloads or early revenue growth. Show that you are disrupting the market and that customers and suppliers are responding to it.”
4. Show the strength of your management Mark says investors are keen to see a leadership team which has “been there and done it before from start-up to scale-up”. He adds: “We often see millennials with these really great ideas, but investors prefer to see a bit of grey hair and experience in the particular industry sector. If you are that millennial, then get an experienced partner or a non-executive director in to give you that added credibility.” Older heads can also help ensure that meetings and presentations run smoothly from dressing appropriately, to turning up on time and using professional language and behaviour.
5. Don't give up too easily: Be resilient. If you fail to land funding from an investor or a bank then learn the lessons, refine your strategy, improve your team and go again. Keep believing in your idea.
Where the opinions of third parties are offered, these may not necessarily reflect those of St. James’s Place.