Karen Holden, Business Advice contributor and founder of A City Law Firm, helps startup founders secure funding for their business with ten expert tips for attracting an investor and retaining their attention.
If you are looking for funding for your business, there are an array of options. However, if you’re looking to secure an investor you will need certain things in place to gain and retain their attention.
Having worked with thousands of businesses, I’ve been through the journey several times and below are the things I witness being considered time and time again.
A sound business plan, financial forecast and pitch deck
This is your first opportunity to grab their interest.
A business plan is essential since it describes the objectives, strategies, sales, marketing and financial projections of your business. An effective business plan will demonstrate your understanding of the market, exit strategy for the investor, their return and your long-term goals.
A financial forecast is estimated information but the closer you can evidence how you got there the better. An accurate forecast is essential to gain the trust of investors, avoids mismanaging expenses and to have a good idea of how much cash your business needs.
A pitch deck is an indispensable fundraising tool. In order to create an impressive pitch deck you must grab their attention. You must tell your story which answers four main points: what is the problem, the solution, how your business is going to achieve a solution and why your business will be successful over and above competition.
Moreover, addressing market opportunity is key since investors would like to know the market size which you are triggering and whether it is appropriate for your business idea. Finally, be prepared with a demo that looks smart and clear not overly dull. Also ensure you sell the team behind it which is as important as the idea.
Be realistic with forecasts, valuations and growth – back it up with evidence and information. Over selling loses their interest and underselling can cause issues for you down the line.
Be legally prepared
Pre-due diligence with your lawyers means you will have identified any red flags, errors or concerns which can be resolved before they are spotted by the investor.
Do you own your intellectual property (IP)? Do you have clear employment contracts, GDPR policies, terms and conditions and cash flow processes? Are there any minority shareholders that could stop the investment?
Protect your intellectual property
Have your IP protected and ensure it is fully owned by you and documented – an investor will want to see your IP portfolio.
Make your assignments or certificates available. IP only assigns if it’s done so in writing so check your designer’s contracts.
Have you thought about what countries you we going to expand to, is your IP registered there?
Founders must all agree with the way ahead and this should be documented in a shareholder agreement. This is a platform to develop upon and shows the investor your clearly aligned goals.
Research the investor
Research the investor you are approaching so you understand their appetite, goals, what you can offer them as well as asking if they are the right fit for you!
An investor wants to know if you are a good match for them, and it’s not just about the funds – it’s synergy, agreed goals and a strong team. Thus, study your prospective investor, and learn about their background, previous business arrangements, and interests.
Be aware of tax breaks and grants
Make sure you appear savvy in your pursuits so have EIS assurance, R&D credits if possible, show you’re aware of any grants applicable to you, and have family and friends invested to show them you have skin in the game.
Understand your competition
Understand who is out there and explain why you are better than them. An investor will never believe you are totally unique but demonstrate it doesn’t matter.
An exit plan for the investors’ money should be clear. Consider how their money is going to be used and what that will bring to the business. A long-term exit strategy for founders should all be laid out for transparency.
Be transparent, passionate and engaging as whilst it’s the brand or product they are investing in, the team is what makes success more likely.
Final tips for securing an investor
Networking and meeting key individuals at different events is always useful for making influential connections, even if it takes time.
Find a solution that will transform the market by providing an innovative approach to the problem.
A “no” can be valuable feedback, if you’re not afraid to ask “why”? It provides an opportunity to rectify your plan and improve your skills.
Karen Holden is an award-winning lawyer and founder of A City Law Firm
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