It’s a topic that every business with any ambitions of growing will be faced with at one point or another – investment. An injection of funds from an investor can transform a company, taking it from the early stages of an idea to a fully-fledged, high-flying business.
According to statistics published by Cass Business School and private equity firm Lyceum Capital, private equity investment into small and medium businesses across Britain reached a two-year high in 2015. Despite the economic slowdown, the total value of private equity transactions in the first half of the year reached £825 million, the highest since 2013, with 80% of investments being between £10 million and £100 million. The latest figures published by the Office for National Statistics, meanwhile, estimate that business investment increased by 6.6% in the third quarter of 2015 when compared with the corresponding period last year.
Given those statistics, coupled with the slightly brighter economic outlook for many industry sectors, it would surprise few if the amount of money being invested into small businesses grows even further in 2016. But not everyone is aware of the opportunities out there, which means not everyone has the knowledge required to secure essential funds, nor do they understand the process that is involved. Love Energy Savings recently secured a £4.5 million investment from NVM Private Equity following a successful pitch. Already one of the UK’s leading business energy comparison websites, the investment will be used to put the company’s plans for growth into action.
As such, Love Energy Savings is in a very strong position to offer advice to other businesses that are hoping to secure a similar level of investment. Read on for our top tips on how to prepare and deliver a killer investment pitch.
Do your research
Before you even think about pitching to a potential investor, spend as much time as you can browsing their website. Learn as much as possible about them and their portfolio; you wouldn’t want to approach them if they are involved with a competitor, for example. Get to know their team, read their news or blogs, and read their backstory, as all of this will help you to tailor your pitch. The more you know about them the better; although you may be keen to secure an investment, you want to ensure that they are right for you. Better to have no investor at all rather than a bad one.
By learning as much as you can about your potential investor, you can work to ensure that their plan for your business will be closely aligned with yours from the off. Not only will this make it more likely that things will go well should your pitch be successful, but it also allows the decision-makers on the board to have a clearer picture of how you can both work together.
2) Don’t forget your competitors
Acknowledging your competitors isn’t a weakness for a business, it’s a sign of strength, and when it comes to presenting a pitch you should recognise them and speak about them honestly. Study and research them inside and out and, as part of your presentation, show how you would position yourselves against them.
A good strategy to use is to try and identify at least four of your biggest competitors and how you could work to be better than them. This not only demonstrates that you understand there are others out there, but also that you have strong goals for the future that involve growing beyond your competitors, no matter how you think you compare now. That said, you need to be realistic. It’s great that you’re ambitious, but nothing will put off a potential investor more than a business owner who has completely unrealistic expectations and targets.
If you’re a fan of the hit television series Dragons’ Den, an often eye-wateringly tense show where budding entrepreneurs get three minutes to pitch and secure investment from a panel of multi-millionaires, then you may have already spotted where many go wrong. One of the biggest mistakes made during unsuccessful pitches is that they don’t know the numbers of their own business.
Make sure that you know your financial model inside out; make sure you have everything in order from your revenue projections, sales models, support for all your key assumptions and enough space for the numbers to change slightly. Remember that everything doesn’t necessarily have to be set in stone, but you do have to demonstrate that you know your figures. By answering tough questions about your financial projections quickly and confidently, investors will know that you’re a safe pair of hands and meticulous in your approach to business.
Preparation is key
4) Tell a story
When it comes to the actual pitch, a simple PowerPoint presentation filled with graphs and data just isn’t going to cut it. Your backstory should be your business’ secret weapon. Stories are powerful and emotional yet often go unreferenced during presentations. While concrete data is what will ultimately swing the decision in your favour as investors will want to know that it is a viable option, opening with a story is a much more engaging and compelling way to draw their attention.
It’s a fact that people react better to pictures than they do words. Not only are images far more memorable, but our brains actually process images 60,000 times faster than text. Of course, investors will want to see hard-hitting evidence of your business plan (charts, graphs, numbers, etc.) but pictures help to enhance the emotion behind your story and bring the presentation to life. Putting a bland screenshot of an Excel document on your screen will impress nobody. Visualise that data!
6) Keep things simple – especially if you operate in a niche industry
When pitching to investors, one can usually assume that those present will understand a business model with some ease. However, if your industry is particularly niche then be wary of making things too complex. Whereas you will understand everything inside out, chances are your investors probably won’t.
You don’t want to patronise anybody, but there’s a balance to be struck. Avoid jargon as much as possible unless absolutely necessary (in which case, explain your terminology), and keep everything from your presentation to responses to questions as simple as possible. Sometimes it pays to imagine you are pitching to a parent or friend with no prior understanding of your sector, or a stranger in a lift.
7) Don’t forget the fine details
This particular tip can be split into two sections: something for you to action, and something to bear in mind for the future. The first refers to the inevitable legal steps that will have to be taken before you sign on the dotted line if you are successful. Having lawyers ready to prepare contracts will ensure that everything runs smoothly, and don’t shy away from clauses and amendments as they may come in handy in the future.
Keep an eye on the projections you state in your presentation or any promises that you find yourself making, as you will be held accountable for them in the future. Stay realistic and keep to the facts, that way you can stick to your goals with the opportunity for over-delivery in the future. It’s tempting in the heat of the moment to say things that investors want to hear just to ensure that you get the deal over the line, but this will inevitably end in disaster in years to come.
8) Keep it concise
Keeping things simple also applies to the length of time your pitch takes. You have to plan to include your presentation and time for a Q&A at the end, so be sure to schedule additional time. For example, if your meeting is booked to last two hours, aim for the whole thing to last for one and a half instead, as it is almost guaranteed that you will run over. You will no doubt want to expand on your points in the presentation or get caught up explaining something in a little more detail as ad-hoc questions will come up. Investors are busy people, and will much prefer something short and sweet than being put to sleep by an overly long presentation.
Investors aren’t necessarily interested in seeing a one-man band. Whilst they will want to hear from the owner, founder or the managing director, bear in mind that this is only a small (albeit important) part of what a business is made up of. Carefully select a few members of your team to join you in the pitch, and let them bring the company to life by allowing them to share their experiences. While this will take a little more preparation on your part, as you want to ensure that everyone is well rehearsed, you will demonstrate great strength and depth by adding more points of view. Again, remember that once you chop through all the numbers and accounts, it’s the people that make a business.
10) Unleash your passion
Following on from our last point, have you ever heard the phrase ‘people don’t buy from companies, they buy from people’? The same rings true when it comes to investors; they prefer to invest in relationships and real people. Those people who have passion and fire inside them, and a drive to really make a difference with what they do, are the ones who will succeed.
Ask yourself: “What am I passionate about?” Although the answer will be different for each person, when you truly believe in something it shines through in your words more forcefully than a fancy presentation ever could. If you believe in what you are pitching and are enthusiastic, then you are more likely to encourage your investors to want to be a part of it.
Finding an investor is easy. Finding the right investor for your business and making the perfect pitch is a little trickier. But that doesn’t mean it can’t be done. If you’ve never done it before, the prospect of securing an investment can seem rather daunting, but research, planning and delivery are the three key components to bear in mind. By following our top tips you are giving yourself the best possible chance of securing an investment to fund your dreams and ideas. There are backers out there waiting to invest in your business, it’s just a matter of finding the perfect one.