When you’re hoping to secure investment for your start-up it’s of the utmost importance that you show potential investors you know your business inside out and can demonstrate why they should believe it will become a success.
With that in mind we’ve created a list of the 8 details any investor will want to know about your business before they will think about supporting it. Most of them should find their way into your pitch, but if they don’t this is a useful check-list to use when you’re putting your pitch and supporting notes together.
1) What problem does your idea solve
Most new products or services become popular because they make life easier for people and solve an everyday problem that is encountered by lots of consumers. Clearly outline and then detail the problem you’re solving with your new idea. Use language that explains everything succinctly, interestingly and in an engaging way.
If your potential investors understand exactly what you’re trying to achieve with your start-up, how you’re going to make like easier for consumers – possibly even themselves – then they will be eager to hear more about it.
It’s sure to come as no surprise that all investors have numbers on their minds and that’s no less true when it comes to start-ups. Make sure you have all the financial information you need either in your head or at your fingertips.
- investment to-date
- sales to-date
- projections – three would be best based around different scenarios
- profit margins
- staff costings
- rental costs
- marketing costs
It’s a lot of numbers, but if you’re asking someone for money then you have to be completely open with them about how much has been spent so far and what on.
3) Potential investment return
While this also falls under numbers, it’s so important that we felt it needed its own section to drive home that importance. Even so-called ‘angel’ investors aren’t really angels; they want to invest in something that will provide them with a return, or profit.
With that in mind, make sure you can illustrate with all the other numbers and details, what you think the return on investment would be. Calculate the numbers for more than one scenario:
- slow growth in a challenging environment
- median forecast
- ‘perfect backdrop’ forecast.
Most investors would plump for the lower one but it’s good to show your optimism and knowledge of what ‘could’ happen if everything works out well.
4) Market knowledge
Investors need to understand why your idea is working and/or why it will continue to work. What problem are you solving with your product or service, why is your solution better than existing ones already available, what makes it different and why will consumers spend money on it again and again?
They are all important questions you need to demonstrate that you know the answers to.
5) Personal commitment
How committed are you to your start-up? Have you given up your free time, your job, your money? If you’ve done one or all of these things then say so. You don’t have to list the number of hours you’ve clocked up designing prototypes or making phone calls – although you could if its fits your pitch – but, if you can demonstrate how much you believe in your start-up with an indication of the commitment you’ve already shown you’ll be surprised by how much that will raise the level of interest.
Your level of commitment also demonstrates your passion for your idea, product or service. If potential investors can see that you’re passionate about it and you can show them why, then they may become infused with some of that passion too which is another step towards really considering your start-up as the right choice for them.
6) Marketing strategy
Include details on your marketing strategy:
- Target demographic
- How you will reach them
- Which social media platforms best suit your target audience
- Inbound, outbound or a mixture
Show you understand marketing, how you will use it and why it will work.
7) Exactly how their investment would be spent
Be as exact as you can. If you plan to spend £45 on a new chair you can include it along with the rent you’ll pay on premises or the wages you’re planning to pay an employee. Investors are impressed with entrepreneurs who can prove they know where every penny goes as well as being able to create a new, successful concept.
But don’t be frivolous; do your homework and ensure you’re planning to pay the right money for each piece of your start-up. If your salary estimate is too high or low then that questions your knowledge of the market you’re working in. It also raises questions over whether or not you’ll be able to afford to keep your business staffed if your estimate is too high, or be able to keep hold of staff if your estimate is too low.
8) How your market will look in 5 years and what it means for you and your business
No-one can predict the future but clear projections of your business, consumer usage and economic backdrop can combine to give a good idea of how things ‘could’ look. Show potential investors that you’re not only thinking about how your product/service and business will work now, but how it could evolve and remain relevant or how it will remain relevant in its existing form.
Then, in that future scenario, how will your business work, will you still be the right person to lead your business or will it be time to find a buyer and move onto your next plan. Understanding your own abilities and how they are best used is another impressive attribute to show potential investors.