As an entrepreneur, you’re one of a kind. You’ve got the ideas, the vision and the drive. But one thing can stand in the way of you and the big time: securing the right investment for your business.
Investment can play such a crucial role in the growth of a business, but approaching private investors is unchartered territory for lots of entrepreneurs. Some venture capitalists will get 100s of pitches sent to them each year, and it’s estimated that just 1 in 100 applications will get funded.
And with the environment so high up the agenda these days, there are lots of businesses in the same space competing for the attention of investors. In a crowded market place, how do you ensure that your proposal stands out from the crowd?
Mark Riminton, Clean Growth UK Investment Platform Manager at the University of Brighton’s Green Growth Platform, identifies 3 broad areas that an investor is looking at – marketability, scalability and capability.
Is your idea marketable, and do you have the vision, business model, shareholder backing and a plan for increasing the value of the business?
Do you have the necessary resources in place to achieve your vision, including people and capital? If you don’t have the right mix of skills, how do you plan to get them? And do you have an innovation strategy to grow the business?
Can your business idea be scaled? How does your plan fit with your target market and what does the competition landscape look like? How will you get your product or service to market and how will you get and retain customers?
Mark says, “Viewing a business through a prism like this enables all parties to increase common understanding of business issues and accelerate the whole process to a successful conclusion.”
Don’t forget, investors are people too. Each one of them is different, but there are some common rules to follow that will maximise your chances of success.
Get the right fit
Each investor will have different interests, so you should make sure that your proposal fits with their portfolio. There’s no point in a clean technology startup approaching an investor who’s only ever invested in established businesses in a completely different sector.
Take the time to research and go for ones with a portfolio that aligns with what you’re doing. Factors to look at when reviewing previous investments include location, industry, amount invested and business stage.
Have more than just a good idea
It’s more than likely that someone else will have come up with a similar idea to yours. But that shouldn’t put you off, because a good idea alone won’t get investment. Good ideas need to be backed up by evidence that they will work, and that they solve a problem that a sufficiently large number of people (your market) want solved.
Before approaching investors, get data that shows your idea makes sense.
Get social proof
We’re social creatures, and behavioural science shows us that we value social proof highly. Investors will be much more interested in a proposition that’s backed by other people, especially those with some clout in your field.
You could put together an advisory group of respected people in your sector and get them to give your proposal their backing, or gather early customer testimonials that support your product or service.
Gain some traction
A proposal that’s already part way down the road is much more attractive than one that hasn’t started yet. It shows investors that you’re serious, that you’ve got what it takes to succeed and that you can do a lot with little. It also shows that you’re likely to use their money wisely.
Traction can mean already having some paying customers, already having recruited talented staff or having an active marketing campaign. You could apply for an award to get some industry-relevant recognition for what you’re doing.
Know your stuff, and be prepared
Any investor will want to know that you have the competency to run a business. You need to know your numbers inside out, and someone on your team (if not you) should have a good grasp of profit and loss accounts, margins and growth forecasts.
During the pitch you’ll also need to be able to answer questions about any aspect of your business, so make sure you’re prepared and practised.
Access support where it’s available
There’s a lot of business support available, and it makes sense to use it if you can. Your local Chamber of Commerce and Growth Hub can help you find the right support and make connections.
Clean Growth UK is a national network that helps green business across the UK access university R&D expertise, scale up, grow and secure investment. It includes a cleantech investor network and business investability and commercialisation programs, as well as providing access to R&D facilities and expertise through university partners.
If you’re a business with an environmental or low carbon focus that wants to grow, innovate or secure investment, get in touch with us through your regional hub.