Securing investment for your start up business can be tricky, even for the most confident entrepreneur. A great and relevant mantra for any start up business looking to secure funding is: ‘the shortest distance between two points is a straight line.’ When it comes to raising investment there are many rabbit holes you can go down. Be aware of your time as being precious, and try to make direct links with investors and groups that are aligned with your ambitions from the outset.
Probably the most important aspect of securing investment is to be clear about exactly why you need the money. Make sure you’ve done your research on the market, the opportunity and the costs involved. Ideally you’ll have early proof that you have spotted an opportunity that you can solve at scale – investors are unlikely to back speculation, regardless of how brilliant a pitch-deck you create, or how beautiful your branding looks. Even having a small number of paying customers on your books will go a long way when it comes to building initial confidence in your idea.
Prevailing wisdom doesn’t exist
Many people ask the big question – what are investors looking for? From experience, they tend to look for a person who can build and lead a team with confidence and this attribute is as important as having a great business idea. The reality is, no matter how great you think your idea is, you’ll have to respond to things in the market that you won’t truly understand until you experience them first hand. Often in the start up world you’re forging a new path, so prevailing wisdom doesn’t exist. It takes resilience and self-belief to keep a team motivated when things don’t go to plan (and they won’t always) and investors know this.
It’s a cliché but preparation is key. The simplest thing is to find people you trust and rehearse your pitch with them. As an outsider, they’ll often pick up on the things you aren’t expecting and will make sure that your story is crystal clear to someone who is hearing it for the first time.
Of course, when it comes to securing investment there is no black and white way to deliver a pitch but it’s really important that you focus on selling your business, rather than your product. They may seem like they are one in the same, but it’s often pointless trying to convince investors that your product knowledge and technical expertise are worth buying into, save that for your customers. Instead you need to create a compelling business case that focuses on the market opportunity and your business model.
Tell tale signs they’re interested
If your would-be investors have engaged with your pitch they’ll understand the proposition quickly and they will ask relevant questions. Choosing investors is a two-way street and if they don’t understand the business that you’re trying to build, both in terms of ambition and culture, then the relationship isn’t likely to progress. With a VC investment or single investor it’s simpler in many ways as there’s only one relationship to manage. The next big sign that they want to invest is if they ask to meet the team or to see your working environment. Having secured investment from some heavy weight investors (and known business leaders) this experience highlighted the need to create a very strong vision in your mind of the outcome you want.
Coming from a competing background can also help entrepreneurs. Even childhood tournaments for instance, can give you good foundations for competing in business. When raising investment you need a very strong picture of how and when you will raise the money you need and not feel afraid to go against conventional wisdom to achieve your goals – that is after all a traditional trait of a true entrepreneur.
How do you know you’re at the right stage?
It’s challenging to take the decision to step out of building your product in order to spend time seeking investment, but in reality you may have to start conversations with investors earlier than you think. Even with a healthy turnover, it can take significant time and energy to raise money.
Always avoid rushing into serious investment until you are sure the business opportunity is real. If possible, wait until your first paying customer is on board, it can make all the difference. Waiting until you are a profitable business is also a great position to raise money too. Often you will know when the right time is, because hopefully your understanding of the market you intend to operate in is growing and your knowledge of the problems your customers face will also grow.
Securing investment – what’s next?
What comes next is executing the plan and being brave. From the minute the money drops in the bank the work starts, and managing energy levels is important. You will have invested a lot of energy just to get investment but really that is just the start of the journey. Building a team, creating and maintaining the culture, while growing the revenues is the next challenge. Very often the plan will also need to be adapted as it could be as much as 12- 18 months since you started looking for investment. In reality everything is open and you will be judged on the decisions you make regardless of the initial plan.
Most investors will offer support but the reality is, many of them don’t have too much time available. They usually have other commitments running their own businesses. It is important to reach out to the ones who will add value. Essentially you should view it as a pool of knowledge that you can call upon for advice but there is a balance that needs to be struck to make the most out of your time.
About Nikki Th’ng
Nikki is co-founder of ClassForKids. He studied Sports Science at Strathclyde University in Glasgow. From there he became a tennis coach at Esporta in 2004 and went on to become one of their youngest Racquet Managers at the age of 20. He devised and started FACE (another business), eventually selling for a profit before starting ClassForKids and securing £1 million investment from high profile investors including the founder of Caffe Nero and also the founder of Photobox to name a few.
About ClassForKids (www.classsforkids.co.uk)
ClassForKids is a secure, cutting-edge online booking and payment system for children’s activities. Used by parents, clubs, coaches, class providers and children’s franchises across the country, the modern platform is simple to use and designed to save both parents and businesses hours of time. Using any device, parents can quickly organise, book and pay for their child’s clubs and classes all in one place and at the touch of a button. Children’s activity providers can also access the platform on the go, via any device to professionally run and manage their business online. From taking bookings and payments, to communicating with parents (via accurate automated messaging), to issuing invoices, managing registrations, class schedules and waiting lists, ClassForKids helps to speed up the payment process while providing full financial reporting to help businesses grow with confidence.