Posted on 9/11/2016 by Gary Tiller
So you have a good business idea and start planning how you are going to deliver it, or you are looking to scale your established business and take it to the next level, the question you are asked is
“are you investment ready”
Startup’s looking for their first significant investment from an Angel or through a series ‘A’ round will have many similarities with a Company ready for their Series C or major Private Equity Deal when it comes to getting ready for investment.
The determining factors...
Managing Your Finances And Forecasting
No matter who you are, good financials and the ability to set out a clear picture of your financial position and where you are going (and how you are going to get there) are a must. This allows investors to make their own judgement on your business and the commercial viability of your business plan.
If you are a startup raising investment for the first time you are likely to face the most tough process in your company's journey. Think about how your track record will read to an outsider, and understand your weaknesses before an investor points them out. Don’t forget the tax reliefs that may be available to you. There are many schemes that minimise tax payable by investors, increasing their returns and making investing in startups more desirable.
Established businesses will need to demonstrate to investors that their business has a consistent track record of profitability or growth and the financials must tie up with the next most important factor…
The Business Plan
The quality of your business case will be crucial to the success of your investment process. Good business ideas need to be underpinned by a well-presented, well-thought-out plan. This is especially important for startups and early stage businesses without a proven trading track record.
Competition, And Market Position
Your business plan is there first and foremost for management to set out its strategy and communicate to the board and potential investors how and why they are going to achieve it. Who you are competing against? and where you are going to be positioned in the market? is one of the fundamental areas your management team needs to understand. If you understand who you are and where your place is, it will help underpin the assumptions you are making in both your financial forecasts and your overall business plan.
Internal Processes And Controls
Internal processes and controls are one of the words that you think only comes up in big corporate structures, but whilst they may be less defined in the early stages of business the concept remains the same. Management need to have clearly defined roles to enable them to be efficient and a board reporting structure no matter how small, to allow them to evaluate the bigger picture and form new strategy. If you have progressed and are now an employed member of staff, they need to have clear job specifications (even if they are broad), clear reporting lines and well thought out performance review to keep everyone sharp and on their toes.
The Management Team
A strong management team is a must for investors. If you’ve already spent time recruiting for the right people you need to help guide your business, then you are ahead of the game, for those that haven't, the management team is the first indication of whether or not a business will succeed, so you need to make sure you have the right people doing the right jobs, and an overall balance to give your board structure and strength.
If you are raising money to add to your management team you should be able to articulate in your business plan who this person is? why you need them? and what impact you expect them to have in the business? It’s likely your new investors will want to be part of this process, so get them involved early.
Finally… don’t underestimate the time an investment process takes, don’t overstate your valuation, know what you are going to do with the money and remember don’t forget to to continue running your business.