4 things I learnt from securing £10m investment
After raising finance for his business twice, Michael Phillips knows what it takes to attract investors. He shares his tips here
There are a variety of reasons you may want investment in your business: cashflow issues, expansion plans or maybe a big advertising push. We have successfully gone through the investment process twice since our launch in 2005. Most recently, we raised £10m for the expansion of Broadbandchoices.co.uk via the Business Growth Fund.
1. Timing is everything when raising finance
Timing is critical when it comes to successfully gaining investment. Pay close attention to the market so you are always on top of recent industry developments. Are competitors looking to sell? Which investors currently have feelers out? Who has recently gained investment? Whilst you can’t control the choices of others in the industry, by keeping an ear to the ground you can make your move at the best possible time.
It may not seem logical but the best time to raise money for your business is before you really need it. No-one wants to invest in a struggling business. Planning ahead gives you the opportunity to do your preparation during the quieter times rather than when your financial records are already under scrutiny.
2. Present your business model from the top down
Any investor considering your business is going to want to see a very clear picture of your business model. As part of this you will need to identify:
- the size of the market
- what your estimated market share is at present
- potential opportunities for growth
Even if you are performing consistently well, this is unlikely to be enough. Investors will want to see what your plans are for significantly increased growth. This might be creating new products, expanding internationally or scaling up an advertising campaign. Funders will have widely differing views on risk avoidance, but they are all unlikely to invest in a company that lacks an exciting vision.
3. Networking and building profile attracts interest
Investors are seldom going to arrive at your door unsolicited unless you raise your profile. You need to bring yourself to their attention, and knowing where to look is important.
Bringing yourself to the attention of investors will require an active multidirectional approach, setting out a range of markers to give your company the highest possible visibility. These include getting high profile awards listings, gaining accreditations, coverage in national press and industry publications, and networking at business events. In our case, being listed in the Tech Track 100 Awards for two years running was pivotal.
Using corporate finance advisors could also facilitate the process. Their role is to link investors to companies seeking investment. The right advisors will have industry appropriate contacts and could take a lot of the leg-work out of your investment search – however, you don’t just need to tick all the investors boxes, you need to sell your vision to the advisors too.
Be prepared to pay significant fees for their services, and do your research carefully to make sure you pick the right one to represent your company.
4. Relationships and chemistry are up there with cash
Chemistry is everything between you and a funder. Although it can be tempting to bite the hand off an investor who is offering to buy into your business, you should proceed with caution.
In a business that you founded and have a very personal investment in, it can be hard to accept the input of a funder – but by seeking investment you must accept that funders will effectively be buying a say in the running of your business. Ultimately, investors are exit focused – don’t lose sight of this fact. You should be clear on the direction you want to take the business and be prepared that you may need to make concessions to those investing in your company.
We have a great relationship with our investors – they really buy into our vision. However, it is essential that we continue to meet their reporting requirements in order to help them monitor their investment.
Gaining investment isn’t a simple process but it should hopefully be a worthwhile one.