Advice from David Pattison - Investment expert & Best selling author
There is an adage that says you only get one chance to make a first impression, and this is never truer than when you are looking for investment. It’s always hard to raise money and many young businesses looking for investment forget that it is a very competitive market when looking to raise funds.
I was recently talking to an EIS fund that invests in fifteen to twenty companies a year. To get to that number they look at around three thousand five hundred opportunities. As you can imagine you have to stand out to get money from this fund.
This is an extreme example, but most investors are looking at hundreds of deals to make very few. Typically, a Private Equity house would look at around a hundred prospective deals to end up doing a handful.
What is interesting about this is that in most cases the investment house gets the decision wrong. The typical industry average for successful investing shows that only two to three out of ten are really successful. The gains in these two or three will fund the losses in the other investments and add significant profits to the fund. So even with all this scrutiny, there is still a high level of risk involved.
How do you make sure that you get the investors’ attention? The first meeting is very important because it could be the last. There are two ways of ‘meeting’ investors. One is face-to-face and the second is through submitting some form of written document or deck.
The first thing to remember is that this is an interview process, and you need to treat it that way.
Let’s look at the four ways you can help yourself when meeting face-to-face:
Network before looking for funds
This is such an effective way of meeting investors. Get out and meet prospective investors when you aren’t looking for money. It gives you the opportunity to ‘sell’ the strengths of the business and talk about your timetable for looking for investment. You will be relaxed, and it gives a chance to show your personality. If they are impressed then trust me, they will stay in touch.
Know your business and your market
If you are looking for money then you should know your business and your market better than anyone. The investor will be impressed by your knowledge of what you do, how you do it, who does what and what the competition looks like.
Be prepared to say ‘I don’t know’
There is nothing worse than being seen to tap dance around the answer to a question that you clearly don’t know the answer to. If you don’t know the answer then say so and then offer to come back with the answer after the meeting. You will have manufactured another engagement opportunity.
Set the agenda
Make sure that the meeting, no matter how casual, has an agenda. If the investor doesn’t come forward with one then suggest one. That then gives you the opportunity to prepare the basis of the meeting. Of course, the meeting will move to other areas but a good start around a set agenda will give you confidence and, hopefully, impress the investor.
If the ‘meeting’ is a written submission it is likely to be a very competitive process. Here are a couple of things you can do to help you get to the front of the queue:
If you are sending a deck of slides in then make them concise and limit the number. No more than twelve to fifteen slides with a strong executive summary at the front. Remember that you are using the deck to get a meeting, and you don’t need to cover everything in the deck or written submission. You want to leave them wanting more.
Always follow up. Don’t just send your documents into the ether and hope someone responds. They almost certainly won’t unless you follow up and chase. Offer more information if required or suggest a face-to-face meeting to discuss more. In the investors’ eyes, this is part of the test.
In any meeting with investors, you are selling your business and yourself. There are a lot of people looking for the same things that you are. The only decision the investor is going to make is whether they want to put their money into your business, and what the likely returns will be.
The more you prepare the better the chances of you getting the investors’ attention and then getting their money.
David Pattison is a start-up funding expert, business chair and mentor, and author of The Money Train: 10 Things Young Businesses Need to Know About Investors. The book won best Startup / Scaleup book at the Business Book Awards 2022.
Read more from David Pattison on what type of investors young businesses should be looking for, here!