Facing potential investors can be a daunting prospect; here’s a some do’s and don’ts
Have a strong elevator pitch: You need to clearly and concisely describe your business with passion and authenticity. Grasp the investor’s attention and they will be keen to find out more.Anticipate the questions you will be asked What problem is your business solving? What is the size of your target market? Who are your main competitors? What is your customer acquisition model? What are you historic and predicted revenues? Be able to answer these key questions and more.
Highlight your team: Management is key to the success of any business. Emphasise the strength and depth of your team, market knowledge, the experience of growing or internationalising a business, and any gaps which need to be filled.
Choose the right investors: It is vital your investors see the same potential as you do in your business so find one that you can relate to. Their portfolio companies usually act as good reference points. Be selective about who you approach for investment – don’t blanket send your business plan out. Research different firms to find the investor that has the right sector and growth experience, track record and personality for your business. Different firms have different approaches and as an investment is generally for the long-term (3-7 years) you want to make sure you select the right partner.
Be open to negotiations: When you have nurtured your business idea from initial brainwave to full-blown proposal, your protective instinct might be to resist negotiation and stick to your own firm view on valuation. In making an offer, the investor will have assessed the technology, market, financial history, projections, management and anticipated future value of the company. Their offer will be based on their due diligence findings, their investment experience and on comparable deals. Negotiation over terms is usual and ultimately you will have to decide how much equity you are willing to give up to enable your business to scale.
Let nerves get the better of you: You know your business better than anyone else so be confident in your delivery. Practice your pitch until it is perfect.
Use jargon: Keep your pitch on message and avoid technical terms. At a first meeting, you need to be able to succinctly explain the commercial opportunity – not a dazzling array of technical terminology.
Have too long a slide deck: If you’ve made it past the elevator pitch and are offered a one to one with a VC then you will usually have 15-20 minutes to explain your business (and the inherent investment opportunity) followed by time for questions. That means a maximum of 12-15 slides so think carefully about your content.
Overlook the exit: Even at an early stage in discussions, investors will want to know how they can realise a return on their investment. Is this likely to be a trade sale or IPO? Highlight likely acquirers and milestones to be achieved before exit.
Catherine Simpson is a co-founder of Scottish Equity Partners (SEP). SEP is a gold sponsor of EIE 17 and wishes all participating companies the very best with their pitches and ongoing fundraising discussions.