To get your start-up up and investor-ready you will probably have used your own savings or been seed funded by friends and family.
In the next stage, getting the first round of serious investment in your start-up business right is both important and very difficult to achieve. The shape of the first deal will influence any future raise and any mistake will just get magnified as time progresses.
5 ways to show that your start-up is investor-ready
To give yourself the best chance of getting the first raise right there are several things you can do to make sure that you are an attractive proposition to those investors who come looking.
These are a few of the things that make a difference to show your start-up is an investor-ready :
1. Do you have a viable product/offering? It sounds obvious but the further down the track of proving that you have a minimum viable product that you can get, the more likely investors are to be interested. The measures of this are really does it work? Is there a market where someone wants to pay a market price for it? Do they want to buy it a second time? Is it likely to be profitable?
2. Are the founders/management aligned? There is nothing that puts an investor off more than a team that does not have the same goals and timeframes. Over time these may change as circumstances do but at the start-up stage everyone should know what they want from the business and what the exit plan is. The potential investors will be really interested in the exit plan as ultimately that is how they will get their returns.
3. How is the company managed legally and financially? This is an area that is often dismissed by founders. It’s seen as a cost, or boring or not relevant. But the legal structure of a business can be a big turn off for investors. If it’s badly run financially, then attracting investment will be very hard and the deal will not be great. My advice for all start-ups is to get the best lawyer you can afford and put in place the best financial systems you can afford. They pay for themselves immediately and should be seen as an investment, not a cost.
4. Are you a real expert on your product/offering and the market you are in? Investors expect you to know more about your company and the market it is in than they do, even if they are a specialist investors. You need to be clear on what the market opportunity is and how big a business you can become and how. You need to convince the investors that there is not only a gap in the market but also a market in the gap.
5. Do you have a well-crafted plan? If you are looking for funds then you need to be clear on what you want the money for and how much. You will also need to be clear on when/if you might need more money and how much. The investor is not just buying you but is also buying the plan. That will determine their return. It needs to be achievable with some evidence that it might work.
Raising money is always more difficult than it looks and always takes longer than it should. Preparing your start-up by being the best business you can be builds respect and trust in the investment community. This will always give you a head start when trying to raise quality investment.
David Pattison is a start-up funding expert, business chair and mentor, and author of The Money Train: 10 Things Young Businesses Need to Know About Investors. The book has been shortlisted for a Business Book Award 2022.
This content was originally published here.