If your business has reached the stage where you need to raise investment capital to grow and develop, being well prepared and adopting key strategies for success will greatly increase your chances.
Consult Your Team: If you are at the stage of raising capital to fund the development of your business, you will likely have in place a team of professionals. It makes sense to consult with them and tap into their creativity and experience. This is a good launching point.
How Much: The more junior and less developed your business is, the more expensive in terms of rates or dilution it will be to obtain investment capital. Carefully consider how much of this expensive investment capital you need in the first stages. As your business develops and grows you will be able to raise capital at lower rates and with less dilution.
Be Prepared: Potential investors are usually savvy business people. They will quickly form an opinion to invest, or not to invest based on first impressions. How do you make a good first impression?
- Have at least a basic business plan, explaining where you want to take your business, how much capital you need, how that capital will be deployed and other basic information. It needs to look professional.
- Make sure you have pro forma financial statements demonstrating how the potential investor will benefit from their investment.
- Put together a physical binder, or digital data room of key documents concerning your business. Make it easy for the potential investor to perform due diligence on your business.
- Have a term sheet setting out all the terms and conditions of participation in your capital raise.
- One of the first places a potential investor will look is at your website. Make sure you have one, and that it is tasteful and represents your brand. A good website is a simple way to look established, successful and that you are going places. Even something very simple is better than nothing at all.
- Know your stuff. You should be well prepared to answer questions about your product or business. You will need to know the financial numbers and be able to explain how the investor will see a good financial return on their participation in your business. Be fully prepared to explain the form of the investment, how it works and the exact terms.
Intellectual Property: If your business or product is unique or innovative make sure you protect your intellectual property. At the very least you will want potential investors to sign a nondisclosure agreement.
Adopting these key strategies will help you make that critical positive first impression and be a launching pad for success.