Mark Pearson is the founder of investment fund Fuel Ventures, which specialises in early-stage companies and offers a London-based incubation studio to its start-ups.
He previously sold Markco Media (parent company of My Voucher Codes) to the publicly listed mobile payments firm Monitise plc in a reported £55m deal.
Whether you’re looking to launch into a marketplace, develop a new product or expand your operations, you’ll most likely be looking for investment to inject cash into your business. However, acquiring that funding can be tricky and you need to ensure that your company is investment ready.
As an investor, I need to know and want to believe that you are worth investing in; I need to be convinced that your business is ready for the next level, that what you want to do is effective, that you have a robust growth plan in place and that I will get a good return on my investment.
Here are my top tips for getting your business ready for funding
1. Understand your market.
Before you start thinking about the actual investment, you’ve got to know your market like the back of your hand. Who are you selling to? Are people going to buy your product or service for the foreseeable future? And who benefits the most from your product or service?
Quality market data is essential for research into current and future trends, who you are reaching and where, the extent of your market, the value of your market and the demand for your sector. Good businesses will also know their competition almost as well as they know their own company and will be able to clearly demonstrate their competitive advantage.
2. Know your numbers
As an investor, I’m looking for scalable business models – I’m not going to give you money because you have a great idea, or because I like you as a person, although that helps. I need to know I’m in for a strong return on my investment and proving this means that you need to have you books in order.
You instantly become more investable if you can demonstrate a strong track record of performance and realistic targets for the future. Trading to date, gross and net margins and the state of your balance sheet are all numbers that you should know inside and out. And because any decent investor will carry out thorough due diligence before they even consider parting with their money, honestly is always the best policy.
3. Prove your worth
Actions certainly speak louder than words and having sales under your belt will speak volumes to a potential investor. Nothing proves that your product or service will sell better than existing clients or customers, and this will demonstrate to an investor that there’s already interest in your business, there’s already a demand for your products or services and you already have a receptive audience that has the potential to grow.
4. Have a strategy in place
More often than not, entrepreneurs are enthusiastic to fundraise, but the strategy to actually grow their business post-investment is unclear. Investors want to know that you have the strategy to deliver the vision you’re passionate about, which means having a rock-solid plan in place.
Your business plan should explore what is needed to become even bigger and more profitable, demonstrate an understanding of how investment can expand the current operations of your business and most importantly, show that your business has lifetime value.
5. Build the right team
“One of the best things you can do in life is to surround yourself with people who are better than you.” Warren Buffett wasn’t wrong – as a business leader, you should surround yourself with people who have skills and experience you don’t have yourself.
You need to build a strong team of people who can support and advise you on parts of the business you aren’t so hot on, from sales and marketing to finance and development. And more importantly, you need to surround yourself with people you trust; people who will work hard for you and believe in your vision.
6. Establish your end goal
There are a few important questions you need to ask yourself when considering investment. What kind of relationship would you expect to have with an investor? Are you looking for a cash injection or do you want a business partner? How much equity are you looking to give away?
Where do you want to be in five years’ time? Investors will be expecting answers to these questions, so it’s important to have a clear vision for the future of your business before you start the fundraising process.
Attracting investors comes down to presenting your business in the best possible light. However, the journey to getting your business investment ready shouldn’t be completed in haste – it’s a process, and one that requires quality time and effort. Having these things in check will help get the ball rolling on that process.
If you can prove that you have the drive and determination to achieve what you have set out to achieve, as well as the right growth plans in place, then you will greatly increase your chances of getting funded.