The startup community is thriving, with record numbers of new businesses launching each year. For each of these companies, securing funding will be crucial to maximising their business potential and growth. However, setting yourself apart from the UK’s other 5.5 million small to medium sized enterprises is no easy feat.
In order to ensure you aren’t part of the 55 percent of startups that fail within the first five years you need to know how to attract investment. As one of the most well-funded startups in the UK, here are a few tips we have picked up along the way.
Provide investors with a safety net
Potential investors have no guarantee your company will succeed. Providing them with a financial safety net will boost your chances of getting them to take a leap of faith. The government’s Seed Enterprise Investment Scheme (SEIS) does just this. If a company with SEIS fails, investors will have losses capped, and be provided with tax breaks that could offer up to 100 percent protection.
Capture their imagination
It’s very rare for businesses to have a finished product or service when they start fundraising. While investors won’t expect to see a polished article, they will expect to see proof of concept. Proving your offering is viable will instantly make it more tangible, boosting your chance of securing investment.
Highlight your partnerships
Proving to potential investors that you are a strong market contender is a guaranteed route to securing investment. Maximising your partnerships, be they professional relationships you have secured, or impressive senior hires you have made, is a good way of doing this. They will provide valuable testimony to your credibility, and promote you among their own networks, which will open the door to initial meetings.
Demonstrate financial understanding and realistic growth expectations
Investors will only trust you with their money if you can demonstrate that you have the necessary capabilities to enable your business to grow. Financial awareness is key to this. For instance, showing you are aware of hidden costs, such as free trials of your product or service, provides potential investors with peace of mind that you will not be thrown off course as a result of unexpected expenditures.
Equally important is setting realistic growth predictions. These should be based on quantifiable data, align with market trends, and demonstrate how your offering is unique and at the heart of an accelerating market.
Shout about your capabilities
Though the quality of your product or service is paramount, investors will also be looking to buy into the individuals behind it. Your ability to discuss your offering in a confident, considered and coherent manner will sell both the offering and yourself. Similarly, timely and considered answers that show you understand your industry will instil your audience with the confidence necessary to invest.
While your competence as the head of the company is crucial, investors will also want to know that there is a strong team behind you. Ultimately, it will be your employees’ passion and understanding of the role they play in your overall business strategy, that will determine the day-to-day and overall success of the company.
Choose an investor for the relationship, not just the money
It’s very tempting to accept your first offer of investment, when the success of your company is reliant on securing financial backing. However, if this leaves you with a relationship that doesn’t feel right, and is on terms you aren’t happy with, it isn’t worth it.
Instead, wait until you find investors that have bought into your vision, can provide you with a nurturing advice-based relationship, and will consequently boost your chance of success. And remember that the relationship goes both ways.
Regularly communicate with your investors, for instance through a monthly newsletter, so that they know where you are on your path to success.
In order to secure investment you need to take your prospective partners on a journey. Provide them with financial peace of mind, encourage them to buy into your vision and shout about the partners you have who have already done so.
Demonstrate you have the team and financial and business awareness to bring your vision to life. Finally, and arguably most importantly, choose an investor that can provide you with a relationship, not just a cash flow.
Greg Gormley is chief financial officer and co-founder of Bink.
Further reading on investment
