Have you wondered about seeking investment for your business? Do you know where or how to start? Have you wondered if it is even applicable to you as a small business?
I recently spoke with Gemma Whates, founder of All By Mama, mum of 2, and a Venture Capitalist scout for Ada Ventures. Gemma has raised over £25,000 of equity investment for ALL by MAMA via angels, crowdfunding and accelerators. Gemma kindly shared some tips on how to seek investment for your small business.
Why seek investment?
There are lots of reasons why seeking investment might be a good idea for your business. It may be that you need it to get your business off the ground, or to scale your business to the next level. You may need money for:
- High level tech
- Buying stock
- Employing extra people
Where do you start?
First of all decide what you need money-wise, clarify why you need it and what will happen when you have it.
Before you look at investing, make sure that you have examined all the different options for self-funding your business. Brainstorm lots of different ideas. Self-funding doesn’t have to mean using the money in your bank account, it can be things like loans, or personal debt.
A good place to start is Swoop. You can use their website resources to discover all the different ways options for finding money for your business, and investment is just one of those.
If you decide you would like to pursue investment, make sure that you speak to someone who really understands what it means to give away shares in your business – your accountant or lawyer will be able to advise you.
What types of investment are there?
So you have decided to seek investment for your business, but what types of investment are there?
There are lots of different types of crowdfunding, but the main ones are equity crowdfunding or reward crowdfunding.
Equity crowdfunding is where people put money into your business and you give them a percentage share of your business
Reward crowdfunding is where people put money into your business and you reward them with something. It could be the product at a reduced price, something promotional, some merchandise.
This suits a product based business, and you can use a platform like Kickstarter.
If you are a service based provider, equity crowdfunding may be more suitable, and you can try a platform like Crowdcube.
When you put your business or pitch onto the platform, there will be due diligence prior to that, and your business will be evaluated and value agreed between you and the crowd funding platform. It is also understood on all these platforms that capital is at risk, as there is no guarantee of return on investment.
You can then list your business, and put your pitch on the platform – more details on how to do that later.
Angel Investors are generally high net worth individuals, who want to invest their money in businesses. They will typically invest in something which is highly scalable from say, £500,000 up.
VCs or Venture Capitalists are employees of companies who invest other people’s money in your business. This can include funds like ADA Ventures who are on a mission to support under underrepresented founders
How to find investors
So how do you find yourself an investor? There are several different approaches that you can try.
Attend lots of different events, circulate and talk to people who may be able to introduce you to potential investors. Speak to other founders who’ve raised investments, sometimes they will be able to share their network with you.
You can type in Angel Investor, some people will put that in their profile (obviously do due diligence here) Look at businesses that you know have investors, and then their contacts. You may find certain names keep coming up because they are an interested agent and investor in that industry. You can certainly approach these contacts.
Join a business accelerator course, NatWest runs a great one. It helped me to tap into a great network of business thought leaders and potential investors.
Some Venture Capital Firms run pitch days that you can apply to join. Angel Acadme is a great place to start, and Founder Partners run a regular on. Make google your best friend to find them If you are accepted you will get a 15 minute slot. You can use that time to pitch, or if you are at the beginning of your journey you can use it to ask for advice, for instance on what they think of your pitch deck, how to do titans etc
How to Pitch
So you have found some people and businesses to approach, but what do you need to do next? You will be putting a valuation on your business, and they will decide if they want to sign on and get a percentage of your business.
In order to pitch, you need a pitch deck.
This tells somebody who doesn’t know anything about your business everything they need to know.
- Introduce your business, what it does, and your mission.
- Include things like your team, what you have achieved to date, press that you have had, and feedback from any other investors.
- Explain how much your want, what you want the money for and what you think it will do
- Your financial projections, usually for 3 years out
- Details of all the things that are going to generate revenue for you
- Your costings
- Your proposed marketing activities
- A cash flow forecast
You also want to create an executive summary which is a 1 page summary of the pitch deck, which you will use on pitch days, and is a great tool to streamline your thinking about the pitch deck.
My top tip is to make the pitch deck editable so that you can tweak it to align with individual investors interests and motivations, for instance they may be passionate about sustainable and eco-friendly businesses.
What are the downsides of seeking investment?
The key thing to bear in mind is that it takes time. For instance it takes at least six months from me saying I’m going to raise money via crowdfunding to actually getting the money into my bank account.
The process is time intensive all the way through, from researching, and applying for investment, to managing your investors. Time that could be spent doing marketing activities or sales will need to be spent talking to and communicating with your investors.
What are the upsides of seeking investment?
For me, the biggest one was actually being able to launch my idea and get my business off the ground.
I have met so many incredible people, and received a lot of superb mentoring and business advice along the way. I have learnt a huge amount, and it has been a real bonus having support and guidance during more challenging times with the business.
What is your top advice for anyone considering seeking investment for their business?
Make sure that you do your research at the beginning, find out as much as you can and consider all the options.
Be really clear on why you need the money, what you’re going to spend it on and what the potential return is for the investor.
Make the most of the people you connect with. Is there a role for them as non-executives in your business as a mentor, advisor or investor? The investment community is incredibly supportive, so make sure that you make the most of it.
Gemma Whates offers support for entrepreneurs seeking investment. Find out more about how to work directly with her here.