In practice, it is not easy to acquire a substantial investment in your venture when assets are lacking. You desperately need funds to finance your growth plans, to expand or sometimes even to survive. How to act? How to raise your chances of acquiring finance? Get ‘Investor-Ready’! Later on in the process, your focus must shift to the details and how you present yourselves and perform as a team. It's like singing in a choir. Everything comes together: the team, the content and the presentation.
The investor casino, a 1% chance to get funded. As banks become more and more strict and reduce their risk portfolio you have to find money with risk investors for example Business Angels or Venture Capitalists. On average only around 3% of the business plans that investors receive are considered of such quality that the company owners are invited to present their plans. And it gets worse. Only 1% will receive funding, and not always the amount they asked for. This is an amazingly small percentage. The question is now: are the other 99% of the plans really of such bad quality or are investors missing good ideas and opportunities here? Investors receive a ton of business plans every week and so do crowdfunding initiatives. They only take a very quick look at the plans. If the business plan is presented not in line with their standards, has an incomplete business model or an insufficient financial analysis, it doesn't meet investor criteria and it disappears in the bin.
How to get better dice in this casino game?
Step one is to get face-to-face with the investor. You do this by sending him or her professional written teaser or executive summary with the right content. Investors like to listen to people that are experts in their fields. This is the investor’s first impression of your venture. If written correctly with the right content, the investor will ask for more information and might invite you to a presentation. Reading the teaser will raise the investor’s interest and whet his appetite.
Questions like: What business is it, how much do I have to put in, what do I get in return (Internal Rate of Return), what is the valuation of the venture, what is the exit strategy and what are the risks involved? need to be answered. You need to create an urge on the other side: ‘I must know more about this opportunity and I want to see these guys!’
Investors look at the following criteria: - unique opportunity - idea protected by patents - proof of concept - winning team - paying customers - clearly articulated, sustainable competitive strategies - scalability in product or service - realistic, achievable financial projections and a clear exit strategy
Step two is to give a presentation at the investor’s premises. In general, this is a 10 minutes pitch in which you give a 10-15 page powerpoint presentation. You have to be fully prepared. No mistakes or inconsistencies are allowed. Keep in mind financial people have very little time! Investors need to trust your plans and your exposure, like with your exams, matters!
Therefore, giving the impression that you know your market and your product, and showing confidence is essential. What also helps a great deal is having paying customers. Or having a seasoned entrepreneur in the team, somebody who has done it before and knows the market. Finally, remember that you will get only one (!) chance in the investor’s office…