11 Dec Four tactics to help you secure investment
Raising investment can be a painful and time-consuming business. It is important to understand how long the process could take, what will be required from you and how best to ensure favourable terms. Before embarking on that journey, it’s worth bearing the following in mind:
Act like a company already in its next stage of growth.
By getting ahead of the curve with your structure, processes, management information and governance, it demonstrates that you are prepared for investment and have the mechanisms in place with which to manage growth. It will help to complete deals faster, lessen your learning curve and significantly reduce management time/resource needed for transition once investment is in place.
Relationship is key.
Begin building relationships with potential investors or acquirers before you actually need/want their involvement. Let them get to know about your business during this time and drip feed good news and positive results to help them build a picture of the opportunity over time.
Understand what their criteria for investment is and ensure it’s a suitable fit. You need to make it as easy as possible for them to champion your company within their organisation. By the time both parties are ready to have a serious discussion, they have already bought in to your business.
Start looking for investment before you need it.
Not only does it take longer than you think, it will also take up a lot of your time. You do not want to slow growth (or, worse, hit cash flow issues) in the middle of raising. It may change the nature of the negotiation and deal terms. Investors can smell desperation, which will result in either walking away or a less favourable deal for you.
Understand the mindset of who you are talking to.
What drives their decision-making may be different to yours. For example, Venture Capital is often looking to invest in a portfolio of companies and need big successes to cover those that fail, while still generating a return for the fund. For instance, an exit of £5m, while great for a founder, may be way off the mark for the Venture Capital.
This is an excerpt from Anthony McGaw’s November event for the Brighton Chamber, Bite-sized Learning: Building a successful business