Preparing for investment can really be thought of as time to get your "house in order".
It offers a chance to dust off the cobwebs and ensure everything is up to date and working to support your growth objectives. Think of it like a spring clean for your strategy.
Opening your venture up to investment means welcoming in new parties and giving them a detailed view of your business. You may need to adapt to offering more transparency than you've been used to.
You will need a clear business plan and strategy to share with potential investors. Financials, core KPIs and facts and figures about the market you operate in will help them understand the opportunity and show your willingness to provide entire clarity into your business model.
Investors will also be keen to understand who owns the "ideas" underlying the venture, how key personnel are tied in and what motivates the driving force (i.e. the founders).
Before agreeing to investment you need to be comfortable with the existing legal structure of your business and how this might shift should investors come on board.
Our first article in this series looked at the pros and cons of different types of business vehicle. Determining which is right for your venture depends on many factors but it is important to balance choosing a structure which works well for you with what looks positive and well organised to potential investors.
Being clear upfront about your existing commitments (including any options or lock-ups) and ownership will help an investor evaluate their position.
Ever heard a financial analyst talk about a valuation model in terms of "garbage in, garbage out"? Well, now's the time for realistic financial projections and the right KPIs that reflect the business drivers. Being realistic from the start will help manage investor expectations and likely lead to a more harmonious relationship for the long-term.
It's also a good opportunity to look at your core processes and ensure they're right for your growing venture and can adapt for changes to your structure.
Last but by no means least everything will need to look good. You want the opportunity to shine and attract the right investors.
A good pitch deck is essential. Ideally it will be tailored to investors, tweaked for each meeting you have and offer a clear investment proposition. Investors in start-up businesses can take many forms – from "business angels" through to institutional investors – and their specific objectives and structuring requirements should be thought through beforehand if at all possible.
This is also a good time to line up the right people in your team and make sure they are also well primed and ready to answer investor questions. Depending on your experience and the size of investment you're seeking this may be a good time to seek professional presentation or media training, or public relations advice.
We are very happy to talk through how you might approach this next phase of your business growth and prepare for the questions likely to be raised.
In the next of our articles in this start-up series, we will be looking at heads of terms and the key concepts these are likely to cover.
Contributors: Robyn-Dee Herdman and Nicole Spurling
This publication is intended for general guidance and represents our understanding of the relevant law and practice as at September 2019. Specific advice should be sought for specific cases. For more information see our terms & conditions.
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