Understanding your investor
It can take time to find the right investor, perhaps between 6-12 months. Ensure you undertake due diligence – who are they and what do they want in return for their investment?
For early stage companies Venture Capitalists will typically expect 5 to 10 times return on their investment. Do your own forecasts indicate this level of potential growth?
To attract investment you need to understand the mind-set of a potential investor and how they think. You are selling them your idea and the story of your potential growth. They are looking for a high return on their investment and an exit that ensures they can get their money out again. You need to create a strong proposition and to be able to defend it against the kinds of questions and anxieties they might have about your business.
Investors are looking for:
- an experienced and ambitious management team
- vision, and a strong strategic case and plan for growth
- high growth prospects and high market share potential
- secure Intellectual Property Rights
- sustainable Competitive Edge and USPs
- products that are ready for sale, or close to market
- a compelling story of the problem your solving and how you’re differentiated
- an exit in order to sell their shares with a capital gain (typically by the shares being sold to another company as a trade sale) and to be able to use the money.
- a strong pitch (see our advice on how to hone your pitch).