Does asking for investment fill you with dread? Do you let your age or experience hold you back? How can you make sure you make the right impression when pitching for money?
I am often asked for advice from businesses seeking funding and how to handle objections from potential investors. Entrepreneurs tend to worry they are too young, too old or that they don’t have the right education or experience. In fact, it doesn’t matter how old you are, how long you have been in business or what your track record is (within reason). What matters to me is you, how you can demonstrate you have what it takes, how well you can articulate your vision, how good your idea or product is and if your business idea really makes sense. This is particularly important in the times we are living in with the changing landscape since Covid-19.
The Basics
The most important thing that I would say if you’re going to approach a private investor is firstly make sure that the business can be articulated in 30 seconds or less. And, secondly, that whatever vision you’re going after you have a team who can demonstrate the capabilities to be able to deliver on it. Do you fully understand the market that you’re going into and who the winners and losers are? Do you really understand how other companies have won in this space? How will you win? And finally, do you really understand the financials and have a business model that makes sense?
As an investor, there’s no way I’m going to pay an overvalued amount. Have you valued your business correctly? You need to think about how the investor can get ten times their money, to take into account that they are going to lose some.
You
Forget the business for a moment, are you a good investment? If I give you my money for your business, I am investing in you as well as the idea. I therefore always look for evidence of resilience, vision, and an ability to inspire others with charisma. Can you articulate your vision in a way that gets people excited? Does it get me excited? Positivity and decisiveness are also important qualities.
All these things are traits I look for in entrepreneurs and business founders, because they are incredibly important in business. Make sure you cultivate them if you want to be an entrepreneur!
So what can make someone stand out to an investor?
It’s hard to define what makes a founder stand out who is looking for money. There is often that intangible quality or spirit that shines through. But, one thing that really does stand out to me is if someone has had it tough. Someone who can bounce back and is resilient. Is this you? Maybe you’ve failed before. Don’t be afraid to share that: I don’t see a problem with people who have failed. In the USA it’s the norm but in the UK they seem to think if someone fails it’s bad and clearly it’s not. You can fail many times until you succeed. That being said, you should never fail the same way more than once.
Secondly, do you think big? I am looking for people who think big but who haven’t lost their marbles in doing so. For example, I heard from someone building a yoga platform the other day who said they were going to have a billion people using their platform. There are just under 8 billion people in the world, so really there is no chance! Whilst it is important to be ambitious you really have to sensor check your big thinking so there is actually some reality in there as well.
Is this your first Rodeo?
Some investors will look at opportunities from entrepreneurs without a track record and some won’t. If an idea is good enough and well thought through, then not having a track record doesn’t make a difference to me. But what does matter to me is that the people with the idea will have the ability to deliver it. You can have a great business idea, but with people that don’t know how to deliver it, it will fail.
The World is Changing- Are You?
Given we are in the middle of a pandemic, it’s also important to look at the current landscape and appetite for investment in different sectors. We don’t know how long it’s going to last and what long term effects it’s going to have. But, it’s highly likely that over a period of time it will disappear. Or it will become a run of the mill thing like the flu. Every business has to look at several scenarios. In a normal market, and a “new normal” market how will your business perform? Investors may now look at a business in relation to Covid. In other words how will this business perform in a Covid world? How can you demonstrate to your potential investor that you have a plan for different scenarios? This is incredibly important.
Do you know what you want?
Before you talk to an investor, it’s a good idea to be clear in your head what you are looking for. In terms of deal structures you’ll find that depending on who you’re pitching, some people will just buy straight equity. Straight equity basically means they are just paying for the stock. Larger companies will put in loan notes and they’ll charge, so be wary of that as a business owner. If someone is putting in loan notes what they tend to do is roll up and compound against you. So just be very wary there as you can have your equity or your value wiped out very quickly with loan notes.
Investors will be looking for some protection, in some cases this may be personal guarantees, although be wary of these, but they may want some form of security, or preference over the company should it go bust. Often investors will be looking for an exit depending on who they are, in 3-7 years. I’m a little bit different as I’m not looking for exits in the short term. If something’s good long term I’m going to stick with it and keep going.
If you are interested in investment and think you have the resilience and vision to impress, check out the application opportunities on my website here.
