Shifting your fast-growing tech business to the next stage of growth involves raising equity, and you’re ready to pitch to potential investors.
Or are you ready?
One of the challenges you face is how to transfer your enthusiasm and energy about your business model to those who are viewing it with a more practiced eye.
When sharing your business information in order to secure seed funding, facts and figures are what impress your potential investors: and how you present this can make or break your case.
Deliver a well thought-out investment proposal
Your investment proposal must be well-thought out, clear, and compelling. Your enthusiasm will encourage you to dash off a few choice phrases and attach a few spreadsheets. Your business advisor will challenge you on these numbers and encourage you to present a comprehensive brief.
Build an investment proposal and business plan that incorporates these elements:
- The problem your tech startup solves: Define the problem clearly and succinctly. What is the issue, and how do you propose to solve it?
- The target market for your tech startup: Who is experiencing this issue or problem, and how will they be affected? What size market is this
- Your competitive advantage: How will you stand out from other tech startups (or existing viable businesses) keen to address this same issue?
- The disruptive element: Is your tech startup truly disruptive, creating a new market and value network whilst displacing existing market leaders? How are you doing this (or how will you do this, with help from these investors)?
- Financial projections: The executive summary will (naturally) simply summarise this information, but be prepared with appendices which fully support every detail and every number.
- Your management team: What are the qualifications of those involved, and how is each one uniquely fitted for their role?
Provide detailed financial projections
The executive summary will provide summarised financial projections, the expected revenues and costs of your tech startup. Supporting evidence will ensure that your potential investors are reassured that these numbers are based on a realistic forecasting model – not simply a rough guess.
Having access to an online accounting system such as Xero, supported by the forecasting tool Futrli will greatly enhance your financial forecasting model. When your numbers are up to the minute (not merely up to the month), you’re able to adapt and revise on a moment’s notice. Profit and loss reports, cash flow forecasts, and budgets are set up and accessible with the click of a button – and assumptions and projections are incorporated accordingly.
Don’t forget to account for tax reliefs, as well. The seed enterprise investment scheme (SEIS) is a 50% tax relief for investors who are investing up to £150k. Or, if you’re not a tech startup and don’t meet the SEIS criteria, the enterprise investment scheme (EIS) provides a 30% tax relief. Talk to your accountant about whether you meet the criteria, and incorporate any relevant opportunities for the investor into your proposal. Remember that your business proposal is primarily intended to prove how their investment in your tech startup will benefit them – not just you.
Be absolutely rock solid on those numbers when you are presenting the information. Meet with your accountant and review the reports being provided, and ask questions until you’re confident in your own numbers. Ask your accountant to question you, as well. If you can answer the accountant’s questions, you are ready to take on the investors!
Be fully prepared for the presentation
Recognise that potential investors will have detailed questions and even concerns about the viability of your business. This is their money, and they want to be assured it will be spent well.
Once your draft proposal is ready, you may wish to prepare a “mock presentation” to colleagues or business leaders who will give constructive feedback. Delivering this mock proposal can highlight items you want to address before going before the dragons.
Ensure you are presenting high-level information in a way that is matter of fact and easy to read. Being overly wordy may feel impressive, but it’s the facts that will impress. State them clearly, in a conversational tone.
The executive summary or presentation will have the highlights; be ready with supporting documentation rather than seeking to overwhelm.
Being ready with well thought-out and solid financial information will not only enhance your chances of seed funding, but will build your confidence in your own business idea.
For help building a high quality investment proposal, get in touch.