By Jamie Ward, CEO and Co-Founder of payasUgym.com
There are plenty of aspiring entrepreneurs out there with good ideas (and even more with bad ones), but what really matters is turning an idea into a business, and that usually takes funding. It’s by no means an easy process and there are plenty of stats to support this, such as ‘only 1% of business ideas ever get funded.’ (In all honesty, it’s probably less than 1%).
To an extent, the fact of the matter is poor business ideas don’t get the attention and good businesses get the funding. Whilst that statement is largely true, you can’t simply rely on the idea and need to put the hard yards to prise cash from investor’s tight wallets.
We were confident in the strength of our idea and genuinely believed that the market was missing a flexible fitness provider. The payasUgym.com model allows customers to purchase discounted gym passes throughout the UK, without having to pay for membership or joining fees — it was this unique proposition that was vital to our funding push.
Here are three top tips to maximise your chances of securing funding:
Have a solid business plan that stands up to interrogation. A good business plan should clearly tell a story. A story of how you are going to create and grow your business. You need to have a fundamental understanding of the market you are entering that will require significant research. If required, pay for the research you need and don’t scrimp at this stage or you’ll regret it.
Your financial model should be clearly presented with drivers that are easy for an onlooker to grasp. For a start-up stage business do not take a top down approach to financial modelling (ie, we’ll capture 5% of the market), always work your plan from the ground up to show you’ve fully understood your growth profile. The challenge is to make your financial projections realistic whilst appealing.
Get your valuation right. At start-up or pre-revenue stage valuation is much less about the size of the opportunity (every early stage business looking for funding should be present huge opportunity) and more about the risk of achieving this. As an entrepreneur you can mitigate some elements of risk, but many are simply out of your control so it’s all about hitting the valuation ‘sweet spot’.
The ‘sweet spot’ is where your valuation attracts enough funding interest (preferably slightly more) than you’re looking for. Too low a valuation you’ll get more interest and ultimately greater dilution, too high and… well you won’t get the interest. Work out ways to assess the valuation by researching other recently funded businesses that are as comparable as possible and try out a few valuations with individual investors before you present to a larger forum.
Use investment networks. Networks like Envestors, Beer & Company and London Business Angels are at the high end of ‘angel’ funding sophistication – it will cost you in the region of £5k to £10k to have access to their network, with a 5% success fee attached to the funding received. Whilst these sorts of fees might induce some teeth sucking, these guys will give you instant access to a large audience of investors.
They only accept on average 5% of business plans they receive, but have funding success with over 50% of the plans they work with. They are not incentivised to work with bad business plans as this would damage their reputation with their investors — in short, they won’t waste your time and want to maximise your chances of success.
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