What do you do? How do you do it? And why would I buy it? Before you look for the next round of investment, remind yourself that there are a few things you have to know in your sleep.
Fantastically generous new tax breaks for investors promise to fuel an investment revolution in the UK, with angels pouring money into small and growing businesses. But so many businesses I meet are not investor-ready; even though they have great products and potential.
So for all those businesses out there that want investment - and there are plenty of them - here are seven questions that investors ask and you need to answer.
What do you do and how do you do it?
I'm constantly amazed that many businesses cannot clearly explain what they do in thirty seconds. If you can’t succinctly say what you do, and why and how you do it - forget investment. If investors can’t understand it, potential customers and suppliers will also be baffled.
What is the one thing in the world you do differently from anybody else?
A product, a service, a new way of doing things - what makes your business unique? Every business has competitors, so why are you different and better than them?
Why would I buy it?
This is a great leveller. Would I use the product or service and could I see other people using it? In other words, does it add enough value and is there a big enough market for it? Is the price competitive enough?
How are you going to sell it?
I have seen some brilliant ideas from some brilliant people - but they have no idea of their route to market. How to get out there, pound the streets and get somebody to actually sign on the dotted line. I am not a big believer in entrepreneurs saying that they only need to get one per cent of a market to make a fortune (and I hear this with monotonous regularity). I want to know how a business is actually going to do it.
How are you going to protect it?
A lot of businesses don’t think about protecting their intellectual property through trademarks and patents. The better your idea or concept, the more likely a big company is to exploit it. Barriers to entry for competitors, or would-be competitors are key. If patents and trademarks are difficult, then establishing a user base, a brand, PR, credibility and customers can be other strong barriers to entry.
Is it a team effort?
I look for a full-time, committed, balanced team with skin in the game (i.e. they have put their own money, time and effort into the business). If founders are not willing to risk their own time or money in the company, why should an investor?
Where does the money go?
Is the business going to fritter the cash on expensive hires and flashy marketing or has it got a solid well-thought-out plan? What can it prove with the investment? Can it get to scale or get to profitability or prove enough to open the door for more investment? Focus is normally the key point, such as a focused plan and a focus on what matters.
These questions - and good answers - are the secret to unlocking many many millions of pounds of new investment into British businesses.