Securing investment is a difficult challenge, but not an impossible one – just be prepared for a lengthy process with plenty of knock-backs. There are many different avenues you can investigate, each with their own pros and cons; depending on your business, some will give you a better chance than others, offering more relevant investors.
Six degrees of separation
You might be surprised by how much you can achieve by putting the word out amongst your already existing network of contacts and previous colleagues or clients. Having set up two businesses in the past, I had a base of existing shareholders who wanted to be involved. In turn, many they were willing to recommend me to their own network – a valuable introduction where the personal touch really makes a difference.
Such recommendations are priceless and it is vital to pursue every lead you’re offered, whether that means driving three hours on a Sunday night to visit a potential investor, or pitching your idea to someone while they’re in the back of a taxi with you. You need to be ready to sell your idea whenever and wherever.
Help from up above
Other valuable groups outside your personal network are angel and crowdfunding platforms, such as Envestors, Crowdcube, Wild Blue Cohort, London Co-Investment Fund, The Angel Co-Fund, Business Growth Fund and British Business Bank, to name a few. With so many around, it is important to make sure you’re targeting the right ones and there are plenty of questions you can ask to see if the platforms are the right fit before you approach them. Given the difference in the platforms, some will offer more relevant investors than others.
So ask yourself: Does the platform have an active investor base? Look at how many investments have been made, when and by whom. Scrutinise the types of investments made and find out what kinds of businesses are typically supported. For example, Syndicate Room, CrowdCube and Seedrs are all crowdfunding platforms who specifically look at startups.
A third route for investment is government schemes. There might well be a UK or European government body that is willing to help support your idea; have a look at Innovate UK, a government initiative, for some of the grants it offers. Be prepared for stringent criteria and plenty of competition. If this doesn’t work make sure you make the most of government-backed incentives for investors such as SEIS and EIS schemes as they make a big difference.
What’s your hook?
Once you have identified relevant investors, securing them is the next hurdle. Somehow you need to persuade your contacts to have as much belief in your idea as you do and you need to prove to them that you are capable of running a business successfully. The idea of an elevator pitch might be clichéd, but there is something to be said for being able to articulate your idea clearly and concisely. What is the hook, the central concept of your business that makes it stand out? Before you can sell your idea you need to be confident in what you are doing and why.
Professional makes perfect
Preparation is key. Do you have a business model that you know back to front? Detailed financial plans and assumptions, supported by clear modelling metrics, will give relevant investors confidence and reassurance. If your business is already running you must detail the state of the business so far, measuring it against key performance metrics that put it into a wider business context.
In a pitch meeting it’s a good idea to support your discussions with a visual presentation, but keep it clear and concise. Around ten professional-looking slides can be presented in ten minutes or less and can be an impressive aid to conversation. Furthermore, when pitching to angel investors your team will be of critical importance. Not only should you seek to highlight your own experience, but if you have a strong board of directors to back you up this will inspire no end of confidence. People are more willing to follow where someone else has led!
Finally, never give up. Pursue every opportunity you have – even if the first person you meet can’t invest, they may know someone who will or can. Tenacity and doggedness are the keys to success.
Andrew Needham is founder and CEO of HeadBox