Finance · 25 August 2015

A guide to getting investment ready

Remember that people invest in people – not just a business plan
Remember that people invest in people – not just a business plan

If you are running a business and have serious plans for growth, then it’s likely you will need an injection of finance along the way. Drawing on my experience of raising finance for Crowdcube, and having seen nearly 300 businesses successfully fund on the platform, I’ve summarised my top tips for getting your business investment ready.

(1) Work out what you want

It may not seem like it sometimes but seeking investment is a two-way street – just as an investor will consider what they want and look for in an investment opportunity, you should also consider what you want from your investors. For example, are you just looking for financial backing, a strategic investment which can help facilitate your business’ growth or are you looking for investors that can offer much more than just finance – such as skills, contacts, advocacy and even a potential customer base?

By defining what you’re looking for from your investors you’ll have a better idea of what funding option is best suited to your business, whether that’s crowdfunding, peer-to-peer lending or more traditional routes to finance such as angel or VC investment.

(2) Get your paperwork in order

Making sure you have a sound business plan and robust financial forecasts seems like an obvious one, but ensuring you have all the necessary paperwork in order should be more than just a tick-box exercise. A good starting point is a compelling pitch that provides a clear overview of the proposition. It’s important to cover what makes the business unique, the potential market opportunity and the strategy for growth.

Any investor will also want to know how and when they could see a return. Great business ideas and ambitious growth plans need to be underpinned by a well-presented, well-thought out business plan – it may not be the decisive factor in securing investment but a poor plan could be the reason behind not getting it.

(3) Back up the numbers

One of the pitfalls to avoid when seeking investment is failing to back up your numbers. So, make sure your business plan and financials are substantiated with market insights and rationale which demonstrates how your plans and projections are achievable. Clear and credible plans and projections are essential when securing investment, whatever the route, so it’s worth spending the time and effort getting it right.

(4) Be realistic

Be realistic about how much you need to raise and don’t be tempted to over value your business, it’ll only serve to discourage potential investors. Ask only for the amount you need to deliver your business plan and a sensible contingency, be clear about how you plan to use the funds and ensure you can justify your valuation.

(5) Sign up for tax incentives

If it’s an equity raise, register your company with the Enterprise Investment Scheme (EIS) or Seed Enterprise Investment Scheme (SEIS), which give investors substantial and attractive tax breaks – up to 50 per cent for SEIS and 30 per cent for EIS.

(6) Get personal

When seeking investment you’ll be mainly focused on dotting the i’s and crossing the t’s but we know from experience that people invest in people, not just a business plan. So whilst it’s important to get the basics right, don’t hold back on showing your passion and enthusiasm about your business.

(7) Make an investment

Raising finance requires an investment of your time and effort, there needs to be an energy behind your raise to ensure you maximise the opportunity so be tenacious, well-prepared and committed. You also need to be prepared to get out there and talk to people, reach out to your community and offer them the opportunity to invest and spread the word about what you’re doing.

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ABOUT THE EXPERT

Darren Westlake is the co-founder and CEO of Crowdcube, an online platform that enables startup, early and growth-stage businesses, from a range of sectors, to raise finance with the added benefit of being backed by the crowd.

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