Funding for a start-up business is still possible - providing you do it right
If you're trying to get a business off the ground at the moment, chances are you've seen some mixed messages about the availability of growth funding. On the one hand, we are regularly reminded that the economy is still struggling to recover and finance is hard to come by. At the opposite end of the spectrum, stories such as the multi-billion dollar IPO of LinkedIn, and the US launch of Spotify have been among the stories to fuel speculation of another dot com bubble.
It's confusing to say the least, but as is often the case, the truth lies somewhere in between the extremes and the message for UK startups is encouraging – innovative business ideas which can demonstrate strong growth potential are seen as excellent investment opportunities. But what steps can you take to help build a strong case for potential investors, and how can you stand out among the 500,000+ businesses which are launched in the UK every year?
Get ready to impress
The investment climate is always competitive, no matter what's going on in the local and global economy, so building a proposition which will stand out among the crowd will be pivotal to your chances of success.
Presenting a basic idea on the back of an envelope won't do you any favours with experienced investors, so build a Minimum Viable Product (MVP), ie - something which has gone beyond the drawing board and has been validated by real customers. Investors are increasingly viewing this as a basic requirement, not least because it's become so easy to get a prototype and company up and running. It also demonstrates some legitimacy to your claims to be an entrepreneur, as to reach the MVP stage it's likely you'll have invested considerable time and maybe some of your own finance to get started.
Prepare for rejection, but don't be put off by it
Don't be surprised if you find investors don't bite your hand off immediately, as they receive literally hundreds of pitches and business plans a year, so learn to live with rejection. But – just because your idea isn't right for the first few investors, doesn't mean you should give up. There are many successful companies out there who had to work incredibly hard to find investment, but went on to do very well when they finally got there.
Perseverance, enthusiasm and belief are all important signals investors look for – so keep going even if the early feedback you get is negative. The key is to learn from it and adapt accordingly.
Don't over-do your business plan
The Executive Summary is the most important part of the business plan for most investors, and many will pigeon-hole a plan purely on the basis of what the exec summary covers. Key do’s and don’ts include:
- Do: demonstrate the market opportunity, how you are offering something innovative and how you would exit your business in the future.
- Don't: drown the reader in spreadsheets and financial data, present stunning predictions without evidence or assume you have more knowledge than the investor. Arrogance is a major turn-off.
Don't forget, many investors put personal chemistry very high up their list of criteria, so include some details about yourself and your passion for the startup you are presenting.
Network like crazy
Unless you've got good investment contacts from the start, you're going to have to go out there and make it happen, so develop your online and real world networks as broadly as possible. Build a tailored online profile to support your business, and then seek out relevant real world networking opportunities and invest the time to meet people who can be useful additions to your contact list. You can never have too many contacts, so commit to your networking activities and stick with it.
It’s incredibly important to learn as much as you can about the investment landscape, how it works in your industry and how you can improve your pitch. There are some excellent programmes and courses out there for entrepreneurs to help improve their chances of success, and recent months have seen a range of new support schemes arrive on the scene to help startups succeed, so make use of all the help on offer.
Remember, professional investors are constantly bombarded with business plans and investment ideas so any edge you can give yourself - be that in the way you explain the business opportunity, or by just making life easier for the investor - can help make the difference between success and failure.
- Create a killer product - make sure you have something real to show investors, preferably with feedback from paying customers.
- Networking – get out there among the investment community and meet people. Discuss your ideas and look for feedback.
- Prepare a succinct business plan with a strong exec summary and headline financial data. Avoid spreadsheet overload.
- Plan for your exit – investors will want to understand when they will realise their return.
- Learn about investor 'needs and wants', and take advantage of all the expert help available.
Author Matthew Stafford is project leader at Gateway2Investment, which has helped raise over £14m for over 40 growing businesses. Find us at www.g2i.orgor on Twitter at @g2ior follow Matthew at @mstafford