Getting ready for equity investment

By Matthew Cushen

There are well worn steps to approaching early stage investors.

1. Your marketing plan

A clear sense of how, where and when you will communicate your offer to your potential customers, including a sense of budget and return for each different marketing activity.

Marketing is often missing, or very vague, in business plans that we see. This article might help illustrate what investors are after.

2. Your revenue and profit projections

A clear sense of how and when you expect the business to grow, break-even and start to make money. Along with – and this is the important bit – what you have assumed and the logic behind those assumptions.

3. What the investment will be spent on

After all, you shouldn’t expect someone to give you any cash without them knowing how it will be invested. Expect some reticence if it is all going on salaries, or if a large chunk is to be spent on marketing without a clear breakdown of the plan.

4. Your cashflow

Your revenue, cost, expenditure and profit projections should also drop into a cashflow, which will illustrate how long you would expect an investment to last – your ‘runway’.

5. Proof points

Any research, experiments or conversations you’ve had that will give investors some sense of confidence in your proposition and your revenue projections.

For example, if you have a product, how far have you got with potential retailers? What indications are they giving you about their likelihood of taking the product at a sensible cost price?

6. Raise and valuation

It’s not a time to be shy about how much you are raising and how much you think your business is worth.

Entrepreneurs are reticent to be explicit about their valuation aspirations, but if not included in the first thing an investor hears about a business, their first question is inevitable. So it’s better to be up front and see if you are in the same ball park.

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