For any start-up business looking to drive exponential growth, securing investment is key.
However, there are certain criteria that an investor or lender will want to review and consider before committing the cash, irrespective of what level of success the start-up business has achieved to date.
Outline an investment strategy
To be taken seriously by a potential investor, a detailed strategy outlining why the investment is necessary and how it will scale the business is vital. The strategy must include a financial forecast and outline the eventual profit the investor will receive and in what time frame, or, as a minimum, demonstrate how the investment will be repaid with interest.
The strategy should also include all factors that determine success, whilst outlining any identified risks to showcase that you are aware of them and have a plan to manage them accordingly.
It is also advisable to be flexible with your strategy, understanding that a potential investor may have their own ideas that could aid positive growth.
Understand the value of the business
Although early-stage business ventures are difficult to value, it is imperative to correctly value the business to ensure you don’t scare off a potential investor, whilst ensuring you don’t sell yourself too short.
It is understandable to be protective of your own business, but it’s important to remember that an investment needs to suit both parties equally. Be realistic with the valuation of your business and seek advice from your accountant or even a business broker where possible.
Define your USP
A USP (Unique Selling Point) is what makes you different from your competitors, where being able to successfully define your USP, your market niche and your target demographic will demonstrate the potential of a more profitable business to your investors.
Ultimately, businesses that can prove that their market is not oversaturated or can demonstrate how they can successfully disrupt their sector stand in good stead for receiving financial support.
People buy from people
Remember that people buy from people and that when a potential investor is reviewing your financials, they are also reviewing you and your capability to grow and develop a business. If you can successfully demonstrate how you have developed the business to date, why you are looking for investment and are able to discuss your forecast growth with passion and confidence in your brand, you are more likely to receive investment in return. For many investors, it’s just as much about the person who founded the business and whether or not they are ‘investable’, as it is the financials and the potential for return.
Research funding options
Researching different funding options prior to approaching a potential investor will demonstrate that you, as a start-up business, is ready to not only work with a third party to drive growth but understands what an investment agreement entails.
Unlike business loans, for example, business investment often involves the purchase of shares or equity, meaning a start-up not only gains funds to drive growth, but also enters a new business partnership.
For start-ups, it’s important to research and approach an investor who boasts a strong track record within a similar market sector or for a similar business model. For example, an investor with vast experience in B2C product-based companies is unlikely to be able to offer the right guidance and advice to scale a B2B service-based business.
Taking the time to source and approach the right investor with your strategy for growth is more likely to result in a positive outcome, enabling the development of a successfully scaled business both in the short and long-term.
By Asma Bashir, CEO at Centuro Global