It is very difficult for a business to grow fast only using income generated from sales or debt finance, so many early stage businesses will seek equity investment from wealthy individual investors, Angels, or increasingly from crowd funding platforms.
Hints and Tips
It’s all about YOU
Ask any investor and they will tell you that they invest in the team behind a company as much as the business idea itself, if not more so. The experience of you and your team is, therefore, crucial when speaking to investors about a business idea. If you are a first-time entrepreneur you should focus on your expertise in the field as well as other areas where you can demonstrate your drive, tenacity and appetite for success.
It’s more than just the money
Early stage investors can be your most valuable assets so you should always look beyond the capital. A complementary skillset is an important consideration and specific experience in your sector will almost always bring additional value to the relationship. It’s also important to look at the size of the investor’s network and how they might be able to leverage contacts to help you develop your business. Also, don’t underestimate the importance of personal chemistry; your investor must be someone you like and trust, and who is in tune with your vision for the business.
Prepare for the long game
There’s so much you won’t know about fundraising until you actually get out there and do it. Do not underestimate the amount of time and effort it will take to secure the right angel investors for you and your business. Factor this in to your plans as you will need to spend a lot of time away from the day-to-day running of your venture. Unless you are one of the lucky few there will be numerous setbacks and rejections along the way, but don’t be out off by this and learn to be resilient – remember that some of world’s best known and most successful entrepreneurs struggled to secure early stage investment.
Seek continuous feedback
Always ask for feedback from investors when discussing your business idea or pitching. Not all will be prepared to provide it but listen carefully if they are happy to engage with you. Most investors will take the view that entrepreneurs who react badly to feedback are usually not investible so bear this in mind and don’t be defensive if cross-questioned aggressively! It’s important to value and consider all the feedback that you get, as many investors will have been through the process of starting and growing a business themselves – and often many times over. This feedback will help you to refine your idea and pitch as you work towards finding the right investor.
Be Tax Smart
The Seed Enterprise Investment Scheme (SEIS) and the Enterprise Investment Scheme (EIS) are designed to help small companies raise money by offering tax relief to investors who buy shares in your company. This can help to de-risk any investment and make it more attractive to investors.