GUEST BLOG: The Key to Funding – How to Successfully Pitch to Investors.
So you’ve got your business up and running, bootstrapped it as far as possible, and are now ready for some seed capital to move you to the next stage….
If you’re considering raising equity, any investor worth their salt will want to fully understand your business before making that all important investment. With so many potential companies requiring capital, you’ll get one chance to make a good first impression. This is why it’s more important than ever to organise and present all your information in a comprehensive, clear, understandable, and professional manner.
While there’s no sure-fire way of securing investment, there are accepted techniques and practices to better your chances.
Write a killer business plan
The business plan is a crucial document that can make or break your pitch. Investors don’t want Tolstoy’s War and Peace, but it should be detailed and compelling enough to convince investors that you’ve done your homework.
It should include:
- an analysis of the market, which explains the opportunity and
- why your company is best suited to deliver on it.
- It should also state what you’re going to use the funding for (i.e. not your own salary!) and
- if you have one, your exit strategy.
Consider a pitch video
Angel and crowdfunding investors are not short of companies pitching to them, so it can pay to make a short video (three minutes is plenty) to communicate your core business proposition. This will give you the opportunity to add some personality to the pitch. It’s really important to state what problem you’re going to solve for your prospective customers and use every day language that’s easy to understand and clearly conveys your aims.
Water Tight Financial Forecasts
If your business or start-up has been trading for some time, then you’ll need to ensure that your financial records are up to date and well presented. If you’ve been keeping all your receipts in a shoe box, now might be the time to hand it over to your online accountant in the UK or otherwise to get your financials in order.
You’ll also need to create a financial forecast that will stand up to investors’ questions. This should include profit and loss, cash flow and balance sheet statements. For start-ups, particularly in the tech-sector, this can be a challenge, due to the level of uncertainty around traction, so building a model can help do this. A major benefit of today’s connected world is a wide variety of incredibly useful websites, such as CrunchBoards, which aids in forecasting.
Don’t Forget Tax Reliefs
If your business is a start-up you may be able to benefit from the Seed Enterprise Investment Scheme (SEIS) for investment up to £150k. This scheme provides investors with income tax relief of 50%, tax free capital gains and an element of tax relief if the shares are eventually sold at a loss. If you’re looking to raise more than £150k, or your company doesn’t meet the criteria for SEIS (i.e. not a start-up), then you may be eligible for the Enterprise Investment Scheme (EIS). The tax reliefs available to the investor are similar, however initial income tax relief is limited to 30%. These tax benefits are really important and therefore it is important to get advanced assurance from HMRC that your company will be eligible.
With the above in mind, it should be apparent that there are several tried and tested techniques which assist in upping your chances of securing investment. A sound move is to gather your documents and data, and “mock” pitch to business leaders. Good luck!
About the Author:
David Gormer has 14 years leadership experience in accounting and business development in the City of London. Having qualified as a Chartered Accountant with Deloitte, David specialised in the London technology sectors. He enjoys hearing about your business and working out ways to help you succeed. David’s personal and entrepreneurial approach makes him a trusted advisor and ally to all of our clients here at Square Mile Accounting.