24/01/2012

By Andrew Pearce, Co-Founder And CEO Of Powwownow

Having been asked this question on more than a few of occasions, I thought I’d share with you my top tips for securing investment.

It’s something even seasoned business people can struggle with and most first time ‘pitchers’ find terrifying. In reality though, with a couple of handy hints and much time given to seriously thinking about what it is you’re asking for; it needn’t be so hard.

Be aware of what you are asking for and have a deep understanding of what you are doing. Without a doubt investors want to know that you comprehend and identify with every aspect of your businesses. Thereafter, they will want you to explain exactly how their involvement, whether monetary, personal, or both will help you reach your goal.

Understand the people you are pitching to and how best to engage with them. Remember, people are different, and as such you should really try to appreciate what it each different person may be looking for. By researching your Angel or VC and/or their firm, you will be able to adjust your pitch accordingly. Some investors may simply want large returns whilst others may have expertise in your field and be able to add value to the company in other ways as well.

Run your idea by other entrepreneurs first. They may have secured funding before and be able to point out holes in your pitch. It’s also good to role play and get them to ask questions they think you will be asked. If you reverse the roles, hearing your own pitch back can also give you a fantastic new perspective.

Appoint a solicitor. It is essential to appoint a solicitor who has experience of similar forms of investment in small businesses. Just one example of where this is required is that, in line with the Financial Crime Prevention Procedures, the business and the solicitor will have to verify the identity of investors before accepting any investment. This will require a copy of an official photographic ID such as a passport, driving licence, services ID card or national ID card.

Look your best. As a general rule of thumb you can never overdress. That said, you should try and represent and embody your company ethos. If investors feel they can connect with a person then they are a lot more likely to make a deal. It’s as much about the person as it is the business, so remember who you are and try to be confident.

Ask for enough, but not too much. If you pitching from an idea only stage, then ask for enough to get you to prototype; similarly if you are in the prototype stage, then ask for enough to get you to market, and finally if you are at market, then ask for enough to scale.

Be realistic about the valuation of your company and never ask for ludicrous amounts. Be sensible, because if the investor really believes in your company, he or she will want to see you grow and be prepared to help out again further down the line.

Put in place a strong management team. Few early stage businesses have complete management teams and very few can claim to hold all the skills required to maximise the potential of a business. These skills include general management, finance, marketing, sales, production and licensing, to name a few.

Entrepreneurs who can recognise their weaknesses as well as their strengths and plan accordingly are well placed to raise investment. Many of the complementary skills required are available on a freelance or part-time basis, sometimes on a sweat equity basis and can on occasion be provided by an investor. Sweat equity is where someone invests time and skills in exchange for a shareholding stake in a company instead of cash.

There are different general management skills required to run a small business compared to those for required for larger firms. It may even be that the founder is not best placed to lead the company through all the stages of its growth and will at some point need to step aside.

And finally, have an exit plan. Businesses that are a lifestyle plan for the entrepreneur often find it difficult to attract investors. One example is a business that will provide the entrepreneur with long-term employment and remuneration but which they will want to continue with until retirement. However, in these instances, a secured loan may still be viable. Having a well thought through exit plan is therefore a key element of obtaining investment.

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