NEWS // "Selling the Sizzle, not the sausage!" - What are investors looking for?
An investor told me years ago that a company had to "sell the sizzle and not the sausage" if they wanted to secure investment from him. You often only get one chance with an investor to try and secure investment, so what are some of the key things to consider:
Know who you are speaking to
Many investors are sector specific and often publicise on their websites the type of deals they are looking for. Don't waste your time or their time by pitching for an investment deal that is outwith their stated investment parameters.
Different investors have different ways of structuring their investments and the deal terms can look quite different. Do your homework on the types of deals that the investor has made and check out their portfolio companies.
Business angel investors will almost always look for an investment for ordinary shares and will want to keep their shares in your company for a minimum period of three years, to ensure that E.I.S. tax relief can be obtained. Indeed if your company doesn't qualify for this tax relief you will be lucky to get angel investment. Other venture capital outfits will insist on taking preferential shares which rank ahead of all other shareholders and you will do well to get any change out of £50k to £100k once their fees are deducted out of the investment funds.
Are you a good fit?
Check out the types of companies within the portfolio of the relevant investor, which are often found on the Investor's website. It is unlikely that you will secure an investment from an investor if that investor has already invested in a competing company. Investors often like a complimentary portfolio where their investee companies can help one another.
Contact other investee companies who have secured investment from the investors you are dealing with and ask them about their experience and what the pros and cons were for them when securing funding.
Make the right approach
Some investors will want an application made in a particular way. Many don't want to see 50 pages of business plan with multiple appendices at the first stage and will make an initial decision based on your executive summary. Take the time to check first with the investor what they would like you to send them and in what format and tailor your approach accordingly.
It might suit you to send your business plan to multiple investors with the same pro forma email, but if the format doesn't suit the investor you might be lucky to have the first page read let alone have your email opened.
Working with the right people
Many investors will look at business plans that arrive via trusted intermediaries ahead of other plans. This will be the case if the intermediary has a track record for vetting the plans beforehand and helping get the company "investor ready". As with any aspect of business do make sure you are working with the right advisers. The right people will know the market you are approaching and can help make appropriate introductions for you and help you avoid making mistakes. Do remember that you often only have one chance to impress an investor! Continued...