When you’ve finally reached enough success in your start-up to begin to consider the contributions of angel investors, venture capital, or private equity, you may wonder what you can do to make your business more attractive to potential investors. Unless your business is wildly successful or you have capital from previous sources, outside funding is a necessity for serious growth ambitions. In this article, we’ll take a look at certain aspects that business owners should examine to avoid any problems or oversights, reassuring investors that their money in your business is a sound investment.
Are you ready?
One of the first things as a business owner you should be concerned with is if you, as a person, are ready for this leap. Dealing with the seemingly never-ending process of fundraising can take its toll on your health and well-being, so make sure to be in top physical condition. This has a psychological effect, too, as you being the figurehead are associated with your brand. If your business looks like it’s killing you, then investors may believe that there’s something wrong with your business, even if your company shows excellent growth.
Ask yourself whether you’re ready for outside influence and increased oversight into your business. Would running your company still be enjoyable when you’re subject to this level of scrutiny? Do you have a defined exit strategy if the business is not run to your standards? Frame your focus on why you’d want investors in the first place.
When thinking of investors, you must be thinking in terms of what they want and bridging the gap between what your personal objectives. Is this possible? If not, you may have to adjust your personal objectives to match your stated objectives. Having these be aligned will give your presentations conviction, confidence, and certainty that is always desirable.
Have A Team In Place
In terms of your brand, don’t be the best salesperson your company has to offer. Make sure you have a solid team of individuals who feel equally invested in your company as you do, able to increase revenue, close deals, and keep your business afloat even without your presence.
Also, make sure your team of important employees is long-established. Having key players jump ship at critical times can create disruption in the operation of a business, and may take time and money to bring new hires up to speed. It speaks volumes to see that other people have stayed with your company, showing that they invested their time and welfare in your hands.
Who Will Lead?
While you may be the natural choice to remain the leader after investment, it may be off-putting to investors who wish to see your business functional regardless of who is in charge (within reason, of course). Ideally, you want to be interchangeable so that if investors see fit, they can implement others in place of you should you not be fit for health or because of involvement in outside projects.
Getting Your Finances In A Presentable State
It is absolutely crucial to have your financials reviewed by a quality accounting firm to assure investors of your numbers. Doing so first will preempt requests with your transparency, saving you time and money, as well as increasing your negotiating leverage in the future. However, if asked, you should be willing to submit your information if the buyers or potential lenders to see real numbers about your business’ growth—even if it is to corroborate your own submission. Typically, the longer (and more accurate) of a financial history you can provide, the more confidence investors will have in your company.
Showing maximum cashflow should be your objective for your business, but emphasize your cost-saving measures as well. This displays for investors that your business is running at an optimal level and that scaling up the level of capital will still keep costs from eating into profit. Any significant reduction in costs should take place at least nine months to a year before seeking outside investors so as not to seem like your business is obfuscating cashflow difficulties.
What’s Your Plan?
Unquestionably, the key premise that you’re looking to emphasize for your company is planned expansive growth. If you can demonstrate a link between your company’s actionable strategies and significant growth, investors will believe your business to be a sound prospect with minimum risk—remember, their money is on the line. Your previous strategies should look reasonable and planned; your future should look equally ambitious and reasonable. If you present numbers that stretch too far from reality or fail to acknowledge present market realities, you’ll turn off investors who find your company too irresponsible and filled with “wishful thinking.” Conversely, if your company exceeds your projected forecast, you can use that as leverage in the negotiating process, as potential investors will fear missing out on an opportunity.
Good Things Come To Those Who Wait
Ultimately, patience is your friend. Just like courting a significant other, showing that you don’t necessarily need investors, but that both your presence and theirs is mutually beneficial goes a long way. The process of fundraising typically takes six months, but this can be longer if your company is still floundering in the start-up phase. Showing due diligence, proof-of-concept, and a significant track record can go a long way, so take your time. There will be countless hurdles, with they be legal, economic, or emotional that will come your way, not to mention rejection for any number of reasons. Take heed to complaints, adjust your methods in a deliberate fashion, and be willing to put in the time investment to get the best results for your business.