Three questions to answer to ensure your business is ready for investment

So you want to raise investment? Rather than leaping straight into action writing a pitch or talking to investors, take a moment and ask yourself three questions.

How much money do you need?
What will you do with the money you raise?
How will your business change and grow as a result?

If you can answer these questions properly – not just in an off the cuff manner – but by providing real detail, facts and figures, then you probably are ready to raise investment.

But the devil is in the detail.

Investors don’t back ideas, hunches or broad-brush thinking. They want proven products (or services), thoughtful plans and evidence to support your approach. These things aren’t just conjured up by brainstorming, desk research and theoretical plans. They are created through action, hard work, persistence and a lot of iteration.

I touted my theoretical business plan around VCs and angels before the penny dropped that I needed to get the business going before anyone would back me.

I learnt that the hard way. I touted my theoretical business plan around VCs and angels before the penny dropped that I needed to get the business going before anyone would back me. The next time I tried to raise investment, (just six months later – but six incredibly busy months) I had not just a web platform but paying customers and a detailed marketing strategy. I raised £150K in one week – from pitching to money in the bank.

The proof was in the pudding. Investors call this “traction” and it speaks lounder than words.

Traction speaks louder than words

Be honest, ask yourself what stage your business is at:

If you have a business idea but nothing tangible yet, don’t waste your time talking to investors. Instead invest your time into creating your product/service/app. It doesn’t need to have all the bells and whistles but it needs to deliver the essence of what customers are looking for. This is often called an MVP or minimum viable product. It allows customers to trial your product, give feedback and for you to understand what needs to change to meet your customers’ needs better.

You don’t have to spend a fortune to develop an MVP. In fact, it’s better if you don’t

How do you fund this? Invest your own money (if you can), talk to family and friends to see if they will lend/invest money or explore a start up loan (but be aware that you will probably have to start making repayments immediately so be sure you can generate revenue quickly or negotiate a repayment free period). You don’t have to spend a fortune to develop an MVP. In fact, it’s better if you don’t – the chances are your MVP will change when you get customer feedback.

If you have got an MVP, focus on getting your first customers – whether they are paying you or not. Being able to demonstrate you can attract paying customers is best, but honest – hopefully positive – feedback can be just as valuable. Work on really understanding your customers – who they are, why they like the product and how you could find and sell to similar customers. This information is gold dust for your marketing strategy. Tried and tested marketing strategies do attract investment.

Work on really understanding your customers…Tried and tested marketing strategies do attract investment.

And then? Well, it’s back to the three questions we started with. To gain investment, you will need to explain in detail how much money you need, what you will do with it and how that will grow your business.

Growth is the key here. Investors don’t want you to stand still. They want you to create value by finding better ways to work, developing new products, attracting more customers. Investment isn’t philanthropy. Investors want a financial gain and that is created when the business grows – fast.

Investment isn’t philanthropy. Investors want a financial gain and that is created when the business grows – fast.

If you’d like to speed up the process of getting investment, it’s worth talking to a professional. Someone who understands the process, someone who has “been there, done that”. Investors are looking for specific information when deciding whether to invest and it pays to get the inside track on what you’ll need to provide – as well as having someone to help you prepare, to challenge you and give practical advice on how to improve your pitch.

If your business is ready for investment, sign up to Fast Track to Funding – designed to save you time and make it quicker to attract investment.

If you’re not sure if your business is ready to raise investment and you want to learn more about your funding options, reserve a free place on the live and interactive webinar “Everything you need to know to raise funding – quickly”

How to succeed at crowdfunding: Free, live and interactive webinar

In this free, live and interactive webinar you will discover:

  • How to select your crowdfunding platform to attract the right investors.
  • The 7 essential elements of a successful investment pitch.
  • How to set your crowdfunding target to ensure success – not failure.
  • The inside track on how to off-set risk to attract serious investors.
  • The secret of crowdfunding (that no one tells you) which is key to success.
  • Resources available to support your crowdfunding campaign.
  • How Crowdfunding Accelerator makes crowdfunding quicker and easier.

BOOK YOUR PLACE NOW
Click on the “Select a date” link below to see all available dates and times for this webinar and to reserve your free place:

(If your browser does not display the booking form, click here to be re-directed to an Eventbrite booking form).

This is an online webinar – all you need to participate is an internet connection and a device with webcam and microphone. It is not pre-recorded but live and interactive so be sure to bring along any questions you’d liked answered. Places are limited to ensure a good interactive experience. Please book early to avoid disappointment.

The webinar is presented by Hatty Fawcett, an experienced crowdfunder, speaker and adviser to startups and small businesses. She undertook crowdfunding twice for her own business venture and has subsequently helped many businesses prepare for crowdfunding. Hatty is a Regional Manager for Angels Den, the Business Angel Network and a Talent Spotter for The Start-up Funding Club and understands what investors look for when making a business investment. She is generous in sharing this knowledge.

How do you value a startup – in the real world?

The internet is littered with stories of astounding startup valuations, achieved within just a few years of a company’s birth. I think my favourite in recent months is the aptly named Improbable, a UK tech simulation company, which raised $502 million (£390 million) in a funding round in May 2017 at a valuation of over $1 billion, making Improbable a unicorn (a business valued at $1 billion or more). The company was just 5 years old.

Are such valuations the stuff of dreams, make-believe and fairy stories? (Surely that choice of the name “unicorn” isn’t used without irony!) How do you value a startup in the real world?

“A startup needs money. It makes the dream come true.”

Now, don’t get me wrong. I expect a founder to be bullish and full of optimism for their business. No one is going to invest in a business you’re not excited about. The issue here is that investment for early stage businesses is vital. It is literally the lifeblood. It is what enables you to build your prototype, test routes to market, build market understanding and provide the funds for growth. A startup needs money. It makes the dream come true.

“A “deluded valuation” can close doors before you’ve even had a chance to say ‘Hello'”

But, a “deluded valuation” can close doors before you’ve even had a chance to say “Hello, I’m Rumpelstiltskin”. Why would you close doors before you’ve even started a conversation?

Established businesses have it easy. When you’ve got predictable revenues there are numerous ways to assess and measure business value. (If you ever find yourself having trouble sleeping, take a look at this Wikipedia article listing ways to value a business. Startups and early-stage businesses are anything but predictable – they may not even have revenue. In such circumstances, the only business valuation that matters is when two parties agree to buy and sell.

“The only business valuation that matters is when two parties agree to buy and sell.”

But how do you get to that point? Where do you start? How do you evidence your valuation? How do you negotiate to reach agreement?

Startup valuation is a negotiation – but not one that exists in the founder’s head. One that is grounded in fact, displays careful planning and contains a dose of realism.

There is nothing more likely to cause a potential investor to walk away than a business valuation justified in the following was:

“I’ve looked on crowdfunding sites and another company that’s not as good as ours is valued at more”

“That’s how it’s done “in the Valley””

Instead, real world valuation starts with:

  • Facts – that demonstrate what you have achieved in the business and that there really is a market that is willing to buy what you offer
  • Financial forecasting – not “finger in the air” stuff, but grounded spreadsheets that demonstrate a founder’s understanding of market drivers, costs and diversified revenue streams
  • Strong team – the right people with the skills and experience to make the financial forecast a reality
  • Credible exit – which demonstrates not just an attractive return for investors on paper, but a believable route to selling shares so that the return can be realised.

Then, it’s a conversation between grown-ups – exploring assumptions, plans and options. The length of that conversation being tempered by the speed at which the business needs the investment!

By Hatty Fawcett, Focused For Business

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If you want to learn more about practical business valuation for startups, sign up for the live and interactive online masterclass “How to create a business valuation that gets your startup funded.”

You might also like “How to value your startup: A brief, practical guide.”

Giving you the tools to raise investment: Online masterclasses for start-ups, founders and early stage businesses

This online masterclasses series is designed to give startups the tools and information they need to prepare for investment in a focused, actionable way:

How to write an executive summary that attracts investors
Learn to create an executive summary for business angels or crowdfunding investors that really sells your investment opportunity.
Find out more and book a place

How to create a business valuation that gets your start-up funded
“Real world” business valuation for start-ups and early stage businesses looking to raise angels investment or crowdfunding.
Find out more and book a place

How to find investors and move them from “Doubters” to “Shareholders”
How to find, warm up and close deals with business angels and crowdfunding investors.
Details coming soon

How to pitch your start-up to raise investment
Develop the range of different pitches you will need when raising angel investment or crowdfunding.
Details coming soon

 

 

Why crowdfunding is like running a marathon…and how you can make it quicker and easier

The power of crowdfunding is undeniable. The media is full of stories of companies raising large amounts of money in just a few days, hours or even seconds!

Brew Dog raised more than £7 million from three crowdfunding exercises

Just Park raised £3.57 million in 34 days

Mondo bank raised £1 million in just 96 seconds

Looking at these examples you might be forgiven for thinking that crowdfunding is easy.

Let me tell you, it’s not!

Crowdfunding is like running a marathon. It takes months of preparation, a good dose of persistence and a degree of stubbornness that stops you giving up even when the going gets tough.

Most of the hard work for a successful crowdfunding campaign is done before you put your campaign live. As with marathon running, the amount of preparation you do is directly correlated to the result you achieve. There’s a lot to do: From preparing written copy and a video pitch to developing a motivating suite of rewards or business valuation. You’ll need to hone your business or project plan in order that it conveys the essential information investors look for, and you’ll need to tee up potential investors so that the money starts to pour in when your crowdfunding pitch goes live.

In fact, crowdfunding is a full-time job – one that’s usually done alongside your other full-time job – that of running your business or project.

Crowdfunding is not an exact science either. Are you certain the crowdfunding platform you have selected will help you attract the right type of investors? Have you pitched your rewards package at the right level to motivate investors? Would it be better to set a lower crowdfunding target and overfund, or should you aim high from the start?

For many, crowdfunding seems appealing but when you look into the detail of what is needed, crowdfunding moves to the “too hard” pile and the campaign never gets off the ground.

For those that do try, there are many pitfalls and difficulties along the way.

The bad news is that over 50% of crowdfunding campaigns that launch fail to achieve their target.

For this reason, it pays to get professional help. After all, if you do run a marathon chances are you will take on a personal trainer or, at very least, research and adopt a training programme.

Crowdfunding Accelerator, an online programme of workshops and mentoring, is designed to make it quicker and easier to run a successful crowdfunding campaign.

Over 8 weeks, in 90 minute (online) weekly meetings you are guided, step-by-step, through the elements of a successful crowdfunding pitch.  There is specially created content which focuses your effort on the things that really matter, workbooks, easy-to-use templates, helpful tips and motivational advice. It’s like having a personal trainer at your side.

There is no doubt that, if you prepare properly, crowdfunding is a good source of finance. In fact, just as a marathon runner can pretty much tell you the time they will run on race day, so it is with crowdfunding. If you prepare properly you’ll know just how quickly you’ll achieve your crowdfunding target , perhaps down to the last second!

A good way to find out more about Crowdfunding Accelerator is to join a free online, interactive seminar: How to succeed at crowdfunding Book your free place below or find out more here

book onto a free online taster session. Sign-up here to receive details of the next taster session.

Crowdfunding Accelerator: Making successful crowdfunding quicker and easier

Crowdfunding Accelerator: An online programme of workshops and mentoring


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How to succeed at crowdfunding: Free webinar
This free 60 minute, live and interactive webinar reveals everything you need to know to succeed at crowdfunding from how to choose the right platform, what to put in your crowdfunding pitch and the thing that no one tells you but which really makes the difference between success and failure.
Find out more and book a place
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The harsh truth is that 50% of crowdfunding pitches fail to reach their funding target. Crowdfunding Accelerator is an eight week ONLINE programme designed to make it quicker and easier for you to run a successful crowdfunding campaign. The programme:

  • takes a step-by-step approach, focusing your effort on the things that really matter
  • provides specifically prepared content focused on each aspect of your crowdfunding campaign
  • supports you with programme workbooks, handy-to-use templates, additional resources and proven tips
  • encourages peer learning, support and motivation through a closed Facebook Group
  • facilitates the actions needed to prepare your campaign through weekly “homework”
  • culminates with “Pitch School” where each participant pitches their campaign and receives tailored feedback
  • significantly improves your chances of crowdfunding success

What participants say about Crowdfunding Accelerator

“Hatty is a great teacher! The rich content of the course kept me interested and helped me understand how crowdfunding fits into various financial offerings. This course has given me confidence on how and when to organise a campaign.” Sue Frost, Co-founder Curamicus

“The webinars from Hatty are great but the best bit is the interaction with the other participants and hearing how they are approaching their journey to investment.” David Toscano, Cin Cin Italian Canteen

“The motivation I felt during my time on Hatty’s Crowdfunding accelerator was powerful. Hatty kept me accountable for progressing my work towards my crowdfunding campaign and gave invaluable feedback every week. Her content was excellent and I learnt far more than I had imagined. We had a good laugh whilst getting some serious work done.” Sharon Maddy-Patel, Maddy Lou Shoes

“Hatty made the daunting process of accelerating my business a simple, outlined and structured process. As a company we have gained direction, professionalism and valuable information through her insights”. Arun Thangavel, Co-Founder, Hollabox

“The Crowdfunding Accelerator was an excellent way to explore the concept of crowdfunding in a real hands-on and practical way which resulted in having everything I needed to proceed.” Claire Timbrell, Co-founder The MacGuffin Project

“You have really helped me address my ideas and improve my plans. The support has met my expectations which were high”. Adalberto Battaglia, Founder Quinto Quatro

“I’ve found your feedback on the homework assignments most helpful. It feels like personal tuition.” Sue Frost, Co-founder Curamicus

“The homework is by far the best bit! It’s what made this so much more practical than just researching crowdfunding on your own, because you end up with everything you need to proceed. Even if you don’t proceed, the homework definitely focuses you on what is important for your business.” Claire Timbrell, Co-founder The MacGuffin Project

“Hatty was a fantastic coach helping us create a short pitch, ensuring the delivery of key investor information in a simple but effective way” Gill Hayward, Co-Founder, YUU World

“Hatty was a delight to work with and her style was friendly yet challenging, she pushed me further and allowed my to try out new thoughts in a safe space. Her experience in crowdfunding gives Hatty credibility and she certainly knows her stuff! Despite being aimed at crowdfunding, I got so much more out of her course with regards to general marketing and sales.” Sharon Maddy-Patel, Maddy Lou Shoes

Dates for the next programme

The next Crowdfunding Accelerator runs on Thursday lunchtimes from 1.00pm – 2.30pm (GMT) on the following dates:
January – 25th
February – 1st, 8th, 15th, 22nd
March – 1st, 8th, 15th

Location
This is an online programme delivered weekly in 90 minute interactive video call meetings. There is no need to travel. Simply log in from your computer (with internet access) wherever you are.

What next?

Got questions about the programme? CONTACT HATTY

Want to join the next cohort of Crowdfunding Accelerator: SIGN UP NOW

Want advice on your funding options? Book a free online funding clinic

 

Five Funding tips for your small business or start-up

Every business needs to raise investment to grow and make the most of opportunities at some point.

When I ran Seek & Adore (an online market place) I raised investment twice. Each time it felt like a rollercoaster ride. I had to learn the hard way what it takes to raise investment. I was recently asked if I had any advice to offer entrepreneurs and business owners going through the process of raising investment. I offered five tips that served me along the way.

Read the full blog post on LinkedIn

Why your executive summary is your most important investment document

*** Book a place on the masterclass “How to write an executive summary that attracts investors” ***

When seeking investment for your business (or, for that matter a social enterprise or creative project) it pays to think like an investor, giving an investor the information they want rather than telling them everything you want to say.

The most important document when you first start talking to investors is your “one-pager” or executive summary. I don’t literally mean an executive summary that summarises your business plan, but rather a short, specifically written document that summarises your investment opportunity and acts as a calling card when approaching investors and angel networks. It is best to keep this to one page.

Why keep it short and sweet?

Investors (especially the serious ones) are very busy people. They have lots of potential investment opportunities hit their in-box every week. Most investors will make up their mind in less than five minutes whether your business is of interest to them.

“You have to give investors the information they want quickly and succinctly to be in with a chance of getting their attention.”

So how do you get the attention of an investor in just a couple of minutes?

The key is to give then what they want! Whilst individual investors will have their individual “sweet spot” for investments, in assessing an opportunity all investors are looking for certain key information:

  • A brief, no nonsense description of what the business is and does.
  • An explanation of the market opportunity – the problem you solve for your customers, the size of the market and the share of the market you feel you can realistically address.
  • An overview of your customers – who they are, any different groups of customers and how you find new customers.
  • How your products and services differ from the competition (and rest assured there will be competition whether you recognise it or not so, please, don’t say there is no competition!)
  • What you’ve achieved to date – investors look for businesses that are already delivering on their business model so highlight key milestones in your company’s development.
  • An introduction to your management team – who the key personnel are; their skills and experience and what they have achieved in the past.
  • Details of your business model – how you make money and whether you have a number of different revenue streams.
  • Your financials – revenues achieved to date, as well as a forecasting growth expected over the next 3-5 years.
  • Details of the investment you are looking for – how much money you want to raise, what you will do with that money and how much equity you are selling in return for the investment.
  • Oh, and don’t forget to add your contact details. If you do “hook” your investor you want him or her to be able to contact you quickly and easily to discuss the opportunity in more detail.

Think of getting a meeting with a potential investor like applying for a job

A good executive summary does the job of a strong CV. It helps you stand out from the crowd and ensures you get called for interviewJust as when you are applying for a job the first step is to get an interview. You’ll review the job description and tailor your CV to demonstrate how you are the right person for the job. So it is with an executive summary.

A good executive summary will position the investment opportunity so that it piques the interest of potential investors and gets you that all important first meeting. When you meet you can go into much more detail, and start to assess whether you want the investor on board. The discussion and negotiation really starts – but that’s another blog.

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Book a place on the masterclass “How to write an executive summary that attracts investors”

and receive detailed advice on what to include in an executive summary, a ready-made template that investors love and a free review of your executive summary.

Reserve a place on a Funding Clinic to talk about your funding options
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What’s in a good investment pitch?

When raising investment for your small business, you have to be ready to pitch at any moment. Anyone you meet could be an investor. It could be the person standing next to you on the bus, someone you meet at a networking event or party or even someone you play sport with in your spare time.

Depending on the circumstances you may not have long to pitch. In some cases you might only have a minute to get your business across (the classic “elevator pitch” scenario), whilst in a more formal pitch environment (such as at an angel network pitch evening) you might have 15 or 20 minutes. Certainly, you won’t always have a Powerpoint presentation. You have to be ready for any eventuality.

So what should be in your business pitch?

A good place to start is with the business concept. What is it your business does? What problem are you solving for your customers? Even in a 20 minute pitch you don’t have long (and there are other things you need to talk about in addition to your products and services) so keep your explanation short and to the point. Focus on the key points and what makes your product/service different. If you are talking about your product/service for more than 25% of the length of your pitch than you are probably going into too much detail.

Next up, talk about sales. What’s your business model and how do you generate revenue? Investors love to hear that you have more than one revenue stream and that you have experimented with different routes to market and identified the most successful channels. Ideally you are looking to show that you’ve hit upon a selling formula that delivers predictable results and is ready to be scaled up.

Businesses don’t make themselves. It is people who make businesses successful. You must introduce yourself and your team in your pitch. You’ll want to talk about the team’s background, skills and experience. Leave the investor in no doubt that you have the right mix of people to drive this business forward.

Your team should start to build your credibility in the eyes of an investor but you want to cement this by talking about your business achievements to date. Highlight any key milestones you have achieved: Key strategic partnerships you have formed, contracts you have won and revenues in the bank. Your pitch needs to demonstrate that you are already delivering results, even without the investment.

No pitch is complete without some numbers. If you are already revenue generating share what monies you have banked. Forecast future revenues (realistically – no one will believe “pie in the sky” numbers) and be clear about your margin and breakeven. Be specific about how the money you raise will be used, and provide revenue and profit predictions for the point at which you plan to exit the business. You must have an exit plan. Investors will want their money back at some point. Without an exit they don’t get a return!

Finally, be clear about how much equity you are selling in return for the investment. An unrealistic valuation can ruin an otherwise brilliant pitch. For advice on valuing your business, download my e-book.

Given you need to be ready to pitch at the drop of a hat, and that you can’t always rely on a Powerpoint presentation to help you remember everything you want to get across, you might find it helpful to have this little mnemonic in your mind to make sure you cover the main points. It’s based around the middle letters of the alphabet:

Image showing what's in a good pitch
Oh, and one final thing, be sure to pitch with passion! If you’re not excited by your business why should an investor get excited? Pitch with energy and enthusiasm and remember to smile and make eye contact.

Good luck!

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If you would like help in developing your investment pitch, contact me , Hatty Fawcett, to book a phone call.

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How to value your start-up: A brief, practical guide

Register and download your copy of the “Valuing your small or early stage business: Art or science?”

There comes a point in the life of every business when you know you need more investment to maximise the business opportunity.

If your business is a start-up or small business you may not have the track record or assets to access traditional forms of lending. Alternative finance can be a welcome lifeline. You may also feel you want to bring additional expertise into the business. In which case, angel investment where the business angel brings expertise, skills and contacts as well as their cash can be a better option for raising investment.

Whatever form of investment you choose, you will need to issue shares (equity), which means you will need to value your business. But what is your business worth? How do you value a small or early-stage business?

Valuing your small or early stage business ebookThis brief, practical guide will take you through:

  • Why formal valuation models will only take you so far
  • How to focus on tangible demonstrations of value
  • Why valuation is a negotiation
  • How to replace “finger in the air” estimates with modelled forecasts
  • Why it pays to listen and learn
  • How to chose your investors wisely

All of which will give you a better idea of the true value of your business.

Register and download your copy of the “Valuing your small or early stage business: Art or science?” now