Investors talk and investors remember.
It is quite common for me to send out an executive summary to an investor or investment group only for them to say something like, “Yes, I know of this company. Are they still looking? We took a look at this last year and told them to come back once they have a little more traction. Have they got any sales yet/did they get the product out?”
You don’t have unlimited ability to approach the market place. Think and act as though you only have one chance and that means don’t ‘knock out’ a business plan or executive summary with the notion that the business is best explained in a conversation. It might well be true but if your business plan does not set up your shop clearly and succinctly you may not be given the opportunity to have that phone call or meeting about your business proposal.
Remember, your first shot is your best shot. You may be lucky and subsequently squeeze an investor out of nowhere but by and large, once you are in the investor domain (landscape), your name and company often get discussed (perhaps at an investment network) and in some cases investors have already come across you as your executive summary might have been emailed from one angel colleague to another.
What are the implications if you don’t succeed?
Coming up short of the funds at the end of this process can make you seriously question whether you really have a business on your hands worth pursuing and that folding it might be a very real consideration.
If you are fortunate and have the time, money to live on and inclination, you could possibly regroup and reconfigure by asking for less, changing to a different revenue model or chasing a different target audience, etc.
Or, if you can wait for the slower sales trajectory and decide instead to dig your heels in deeper, roll up your selves and resolve to grow slower via organic revenues, then maybe you can skip the ‘seed’ round and go on a year or so later to a VC or super angel A-Round (£1-4m ish). This should allow you to keep more equity for a longer period than if you’d also done the seed round first. Sometimes this is not a poor second option. It is worth noting though that businesses with some sort of traction or validation (in terms of established turnover or a decent audience size), usually come with a higher investor desirability. You may therefore find that if you tried again in 12-18 months with some ‘proof points’ ticked off, you may bring in that investment capital and expertise.
Are there any additional fundraising options?
“Options for what?” Should be your first question because fundraising is a process and not just a question of someone opening their contact book to investors.
My view is that investment readiness (IR – very often means preparing your written and numerical data) and fund-raising (FR – the activity of linking business to investment source with a view to discussing a deal’s potential) are two different specialisms but this is a whole other subject that I have blogged on elsewhere.
I have a colleague who feels that between the IR and FR comes something called being ‘Deal Ready’ and I would agree with him. The problem is that the investment ready and fundraising get mixed together in the fog of the angel investment networks. These networks are a genuine route for companies to chase the skirts of business angels, some fine deals are done in these environments but there can also be an awful lot of spillage.
So, back to the point: some options you may want to consider can be found in the British Business Angels Association (BBAA) website. Look at their Directory for either Angel Networks or Professional Service Providers. If your opportunity is deemed of good quality and potential investor desirability, then you may get a fundraiser such as myself to work on success fee only.
If you’re not quite ready and prossibly in the 95+% group, then be prepared to spend to get yourself into shape.
And finally. Don’t underestimate investor feedback!
It’s not much fun if you find yourself in the 95+% bracket of business trudging round the networks hoping to spark some interest.
And the reason you are in the 95+% group?
Well, something is probably wrong. It could just be that investors don’t feel that excited enough by the opportunity or its returns. It could be that they think you have overdressed the proposition and don’t give straight answers. As above… “a million and one reasons.” An investor’s “this one is not for me because …” feedback is very valuable. “Not one for me” feedback from 5 investors is immensely invaluable. If they all say similar things, then your lack of cash on the table is probably to be found somewhere in their feedback.
Post author, Aristos Peters is a strategic advisor who undertakes fundraising, strategic growth development and NED advisory roles within early-stage companies looking to work up the steps of the investment ladder towards an exit. He works closely with angel investors, High-net-worth individuals With experience especially within the areas of digital, online, technology and media. His background prior to operating in the equity finance sector has been in b2b business development, sales and marketing/brand communications.
He is currently putting together a business angel investment syndicate / accelerator, The Big Bang Syndicate and blogs at: http://weklik.wordpress.com/
Want to know if your business plan is suitable for funding? Then why not take our quick and easy investment readiness survey and see if you can answer these key Business Angel questions…. http://goo.gl/2VJLX
Tags: Angel investors, Aristos Peters, BBAA, Big Bang Syndicate, British Business Angels Association, business angels, Business Link, deal ready, Fundraising, investment readiness, investment ready, raising angel finance, Raising equity investment, super angel, VC