Rona McFall, head of entrepreneurial solutions at Winning Pitch, outlines four top tips for start-ups looking to secure investment for their business idea.
If you have a new product or service you might lack the capital you need to make it a high growth enterprise. One option is to pitch to potential investors, such as businesses who operate in the same industry, with the aim of convincing them to fund the idea in return for a share of your profits.
You can find investors in a number of ways – including networking with others in your field, speaking to a business adviser, looking at online funding websites and visiting a university with an entrepreneurial programme who may have the links you need. In Lancashire you can contact Boost.
When you make a connection and want to convince them your idea is worth investing in, it’s not quite like BBC’s Dragon’s Den, but you should take lessons from the show and be prepared if you want to make a success of your pitch. If you are serious about obtaining capital, you need to put the work in to prove your idea is a good one and worth their time (and money).
Here are four things to consider before your pitch:
Ensure you can present them with a detailed business plan
Investors will want to know you have a clear idea of where your business is going and how you will take it there. You need to convince potential stakeholders that your product will be a success and profitable, that your aims are achievable and you’ll spend any money they invest responsibly. In your plan, consider such things as how much capital you already have, a cash flow, potential risks from competitors, staffing and the business environment.
Prove you have a customer base
You should be able to prove there is considerable demand for your product/service by conducting market research. If you have a new product, one way to persuade investors is to get firm orders or letters of intent from customers in advance. If you can afford to, you could try selling a limited batch to prove there is a demand.
Conduct market research and prove there is a demand if you want investment in your new product or service.
Don’t ask for too much
Overbidding can raise suspicions that you’ll be a potential liability as you’re increasing the risk to the investors. You might want to consider investing more of your own money into the business first, as it may otherwise indicate a lack of faith or commitment. Put time into figuring out exactly what you need to put into place and how much capital is required before you even approach investors. Whatever you do, don’t make figures up. If they are too far out, you may scupper your chances of funding or additional capital from the investors.
Don’t ask for too little either
You may think you have a better chance of investment, but you risk not being able to deliver and your potential investors will be suspicious of this. If they do invest and your idea stalls because you don’t have enough funding, their initial investment may be lost unless they put more in – and they may not be willing to take this risk.
What’s more, you risk “burning yourself out” to meet impossible deadlines. Think of running your new business as a marathon rather than a sprint, and keep everything realistic.