Impressing investors

[RPower]

If you're an investor, or business that's gone through an investment round, I'd love to hear from you as to what your tips are when trying to impress investors, build relationships and get them on board.

What do you find works when approaching investors for the first time? Practical tips would be very much appreciated and may appear in an article.

Thanks! Rachael.

 

[Ashley_Price]

Be able to show you have done plenty of research to back up any claims or figures you plan to present. Don't pull figures out of the air. Don't assume you're going to sell enough to cover all your outgoings, do a best/worst case scenario - show what will happen if your business gets no clients or customers for six months (or a year for some industries). (UKBF is littered with stories of people who set up their businesses and expected to get lots of sales in month 1, only to find that didn't happen and, in month 2, they couldn't afford to keep going.)

Too many people go to investors trying to make out their business idea will be the best thing since sliced bread, but have nothing to back those claims up. Investors aren't stupid, they know what they're doing or they wouldn't have made enough money to be investing in businesses.

And point one on the outgoings, make sure you show how you are going to pay the investor back or how they are going to be rewarded from investing in you. I was told early on, so many people forget to show how they plan to pay money back.

What will really impress is if you can show you know your business idea inside out. You can answer intelligently, nearly any question that is thrown at you. But don't lie, don't try to wing it or answer with the first thought that comes to mind.

 

[Mark T Jones]

Mostly what Ashley said

Focus on the business, not the idea or product

Be intelligent in your assumptions

Target investors who have reason to be motivated by your business

Read my business plan guide!

Keep it brief / simple

 

[garyk]

Be yourself, your figures have to stack up of course but an investor is investing in you.

Don't worry about having to know your figures for 3 years, you can have them written down. Thats just bol***ks for the TV.

 

[Ashley_Price]

Don't worry about having to know your figures for 3 years, you can have them written down. Thats just bol***ks for the TV.

Not necessarily true. When I was approaching people for investing in Pavilion, I had to have my figures memorised, as some were asking me questions over the phone. You need to be able to show figures, yes, but also be able to back up with how you came to those figures.

Anyone can put figures down on a spreadsheet, but an investor will look behind those and will ask "How do you know you will get X number of customers in six months?" or "You have your construction costs as £X for three years' time, but what happens if your supplier increases their prices or they go out of business?"

 

[garyk]

Fair point Ashley, was just going by my own experience - having it written down was no obstacle.

 

[Ashley_Price]

Fair point Ashley, was just going by my own experience - having it written down was no obstacle.

Oh I agree, you just need to have it in your head as well, in case the investor throws a curve ball (as I had a couple of times).

Of course, each experience is different.

 

[FD Analytical Accountants]

I would say a great idea AND a really strong understanding of the financials (current and projected), I have seen so many business pitches fail due to poor financial understanding - instantly the entrepreneur loses a huge amount of credibility which causes either; (1) the deal to "fall over" and no investment is forthcoming OR (2) the venture capitalise / investor takes the "power position" and ends up with a significantly higher equity stake.

I should emphasis that those with poor financial understanding were not clients of ours

 

[glencooley.com]

It would be good to qualify what type of investment round. There are very specific things that investors look for and businesses present depending on the stage of the business.

Angel investment is very different conversations compared to say a series C fund raise.

Whilst essentially pitching to investors is largely a selling exercise again depending on what stage you are looking for investment will not only change the type of investors you will NEED on board there are also points about how involved investors want to be and this is again largely dependent on business stage and investor expectation.

Angel round investors maybe looking to work with the people and develop out the idea and help get them off the ground, later stage investors may want a more hands off "board" level of interaction as you are just part of a portfolio and they are closer to realising returns than say at the angel or series A/B stages etc.

For example early stage investors maybe looking more at traction and growth rather than a later stage investor who wants to see profitability and clear strategy and what an exit or other liquidity event will look like. Later stage investors will want to know what the path to that exit is and see the data to back it up.

Another factor is what the investment will be for and this has a lot of overlap with which stage a company is at.