So you’ve decided to start up your company and fund it with the help of external investors. There are things you need to consider before you find your investors, while you’re pitching to them and how you work together with them once they’re on board.
Starting a company with investors – making the right choice
It’s a big deal for business. Choosing the right investors is, arguably, more important than finding the right employees. Once you’ve made your selection and their money has transferred into your business bank account your chosen investor is a part of your business for some time and, to part company, you’ll need to arrange for someone else to buy them out.
To choose the right investor here are five things to consider:
1. Write your business plan
Your business plan will be crucial to your success in laying out where you are now, where you want to be and what you need to get there. Having all the details in place is also crucial for your pitch to investors and it can help you to focus on what sort of investors you’d like to attract.
2. Do your research
Ideally, you should make a database of the investors that you research listing out their details, what their specialities are, their traits and details of businesses they’ve already invested in. Then try to find out more about them – perhaps by speaking with some of the companies they’ve helped.
3. Identify mutual links
Take a look through your own business and private networks to see whether you have any mutual acquaintances who may be able to make an introduction for you. Word of mouth and personal recommendations are always much better received than a cold call. LinkedIn is a great place to start with this type of research.
4. Tailor your approach
As with any sale, a tailored approach will be far better received than a generic pattern. Use the research that you’ve done to ensure you flick the right switches and get them to open the door to at least hearing your story.
5. Get your business noticed
With the right marketing, you may well find that investors come looking for you too. This doesn’t need to be expensive and social networks such as Twitter and LinkedIn can give you the perfect platform to get noticed. Position yourself as an expert in your field and position your business in much the same way.
Pitching your startup company to investors – things to remember
1. Warm it up
If you’re sending in a pitch cold, make a call first. And make sure you tell the investor why they should be interested in your proposal. Some investors won’t even consider a proposal that has simply been sent with no other form of introduction.
2. Be realistic
Whether you’re talking about your business projections, the amount of money you need or the share of your business that you’re willing to offer in exchange for funding make sure you have facts to back up your figures and show that you know them – inside and out.
3. Make it succinct
There are a lot of details to get across, but when you’re pitching you should have a copy of your full business plan to hand, make sure you condense it to include solely the facts that the investors need. PowerPoint can be a good tool for your pitch and try to keep it to 20 slides maximum.
4. Know your facts
The investors you’re pitching to are going to ask you a lot of tough to answer questions. They need to make you feel uncomfortable and will grill you to make sure that you can cut it in business. Anticipate their questions, and make sure you have the answers ready, all based on fact.
5. Create a buzz
You need to make your business an exciting prospect and you need to be excited about it. It’s also important that you recognise when to rein this excitement back though – it’s a fine balance between being contagiously excited and being an annoying nuisance.
Working together with investors to make your startup company a success
Once your investors are on board they should be able to give you a lot of support, especially in the early days.
1. Sharing customer networks
Your investors are likely to have a wide network of contacts and, if you’ve selected an investor who specialises in a particular sector, they are likely to be able to put you in touch with a number of prospects too.
2. Introducing stakeholders
As well as potential customers your investors may also be able to introduce you to reliable suppliers and other businesses with whom you may be able to form affiliations or collaborations, making both businesses stronger.
3. Promoting your business
Also likely to have good relations with the press and other useful organisations your investors may be able to help to promote your brand, engaging with people through the press, via networking and by using social media networks, such as Twitter.
4. Attracting other investors
Once you have the interest of one investor others may become interested. Many investors are connected to one another and will share their new finds or suggest others for you to pitch to as well.
5. Business know-how
Finally, your investors are likely to have been in the startup environment before and will be able to help guide you through the many tasks that you need to complete in order to get going and to become a success. Remember, it’s in their interests for your company to be successful too.
Your limited company and investors
You’ll need to register as a limited company to offer shares of your business to investors. Starting up as a limited company is likely to be much more attractive to investors, showing that you have a dedication to your business and that you’re taking the long-term view.
Registering your company with Companies House means your company name can’t be copied and should you wish to form a long-term exit strategy your business is set up to do so from the outset. It’s quick, easy and cost-effective with The Formations Company. Plus you can take advantage of our years of formations and business start-up knowledge, using our guides to steer you through those first days of business and beyond.