Many a great business is started on a shoestring budget. But at some point in the journey of many businesses cash becomes vital to fund the path to growth. Today there are so many ways to access finance – from the traditional bank loan to peer-to-peer lending. Yet, for high growth companies business angels are still one of the most popular source of accessing finance. A quarter (26 per cent) of GrowthAccelerator clients have had investment through this channel and half say they’d be more likely to release equity in their business if the investor also offered relevant advice and support.
If you’re considering discussing investment with a business angel, what do you need to know? We have all watched Dragons’ Den and seen both good and bad pitches to the investor panel from an array of entrepreneurs. What’s evident is that irrespective of how innovative, successful or exciting the business is, the Dragons will be announcing ‘I’m out’ if the pitch they hear doesn’t hit the mark. Here are a few points on what other entrepreneurs and business owners can learn from the show, and how you can ensure you present a winning pitch to potential investors.
Lay strong foundations
First of all it’s worth remembering that the pitch itself is actually the tip of the iceberg – there is a lot of work that goes into just getting there. When pitching to an investor you’ll need to have prepared a business plan, which explains exactly what your business looks like now and what it is planning for the future. A really detailed yet clear and concise business plan is an opportunity to impress the investors but will also help you to clarify where you want the business to go and how you plan to get there. The executive summary at the beginning of the plan is especially important to make a good first impression as it sets the tone and sums up the essence of your business. Think about consulting an expert business coach or advisor who can critique your plans as an outsider. Another pair of eyes will only make your business plan more robust and help give you the best possible chance of securing investment.
Similarly, decide what you need the investment for – whether that’s stock, a marketing programme or product development. Work out how much this will cost and what value this activity will subsequently add to the business. A business angel is only going to invest if they are confident that their investment has a worthwhile purpose and will provide them with a good return.
Leave no stone unturned
Everyone knows that preparation is key. But it’s not enough to just have an idea of what you’re going to say – prepare thoroughly for every aspect of your presentation. You’ll only have a limited amount of time to present and it’s not uncommon for entrepreneurs to get carried away with a passionate and detailed overview of their product or service and then run out of time. Practicing timings is essential to make sure you get all the necessary information out within your allotted time. However it also helps you to figure out what works, and what doesn’t work so well, allowing you to refine the contents and to focus on making the presentation as engaging as possible. Deliver your pitch to friends, family or an independent expert so that they can give you feedback that you may not have considered.
Once you’ve prepared your pitch, make sure you have considered the questions you may be asked. Put yourself in the investors’ shoes; think about what you would want to know in their position and make sure you’re armed with the answers. Know your figures backwards to avoid the awkward pondering pauses we so often see in the Den and if you don’t know the answer, don’t blag it! Be honest and say that you’ll need to look into that but would be happy to get back to them with the answer. This will receive a much more positive response than an inaccurate number – and you’re far more likely to get caught out, scuppering your chances of investment altogether.
Although it’s important to prepare for any questions thrown at you, remember that Dragons’ Den is a TV show and ultimately a form of entertainment. In real life, you’re bound to get a few questions and if interested, the investors will want to dig deeper into the answers you give, usually in a meeting after the initial pitch.
Regardless of all the preparation you do, for many people pitching to investors is understandably still a nerve-wracking experience. Take a few prompts in case you get stuck, whether that’s on the detail such as profit margins and financial forecasts, or simply the key points you need to cover. Even if you don’t use them you’ll feel more confident knowing that you can draw on them if you need to.
It’s all about the potential
Although getting your facts and figures in order is of course essential, don’t worry if the business isn’t currently in the perfect place as long as you can demonstrate its potential for future growth. Focus on its track record, the progress that it has made and the opportunities that you have on the table and that you envisage going forward. It’s this potential that the investors will be looking for.
The investors will also be looking at you as a person. People back people so make sure you portray your passion and ambition for the business. We’ve seen many occasions on Dragons’ Den when the Dragons buy into the entrepreneur that impresses them, investing in the person as much as the business. Be yourself and make sure your personality and expertise shine through.
Getting investment for your business is an exciting time, opening the door to so many new opportunities for your business. Give your business the best chance possible of securing finance from an investor and set yourself on the path to growth.
