How to Prepare Your Startup to be Investor Ready

Investors can be approached by several companies in need of capital every day. How can a startup survive this competitive selection process?

As the famous Spanish writer Miguel de Cervantes says: “To be prepared is half the victory”. Inspired by this well-known aphorism, we will give you the tools to understand if your business is ready to pitch for funding from new investors.

  • Management/board expertise: having a deep knowledge and understanding of the industry you work in is not enough. It’s also very important to gather together an experienced and stable management team, able to accomplish the business plan and manage the company operations. Demonstrate that the whole team is committed long term to the business.
  • Do your homework: work on a realistic business plan, where you show the strategy that supports your present and future projects. It should show your understanding of the size of the target market, key customer demographics, demand for the product or service and competitors.
  • Be financially realistic: show only the realistic financial forecasts and the achievable returns that investors could have. Start by putting down your expensive first, like legal fees, accounting, salaries, advertising and so on expensive. Then go on forecasting revenues, both conservatively and aggressively through targets and stretch targets, so you will keep your team motivated whilst maintaining a more realistic view.
  • Be inclusive and flexible: even if it is your team and your project, be open-minded and acknowledge you can gain from the expertise of an investor who wants to be part of your board or business management.
  • Know your customer: you must know your customer and target market. This analysis includes the market size, demographics, trends, pricing strategies, accessibility, growth potential, demand for products and services and commitment to the business development.
  • Set your business valuation: this includes the equity available for the investors and the strategy for the exit.
  • Don’t hide behind the curtain: explain how you intend to use the investment funds. Somebody who believes and invests in your dream deserves to know how its money is going to be used.
  • Be different: differentiate from your competitors. You can work on your product, on its distribution, on the location, on the profits and returns, on the technology. You have many ways to establish your Unique Selling Proposition (USP) but ensure it’s valued by customers.
  • Growth projections: provide an easy to follow and manageable business strategy and growth forecast. Combine this with a planned financial manageability over the period.
  • Prepare for the objections: it’s important to be prepared for possible objections from investors, offering either explanations or solutions to objections. Demonstrate that the board has thought about the project from different perspectives.
  • Competitors: do not think only about the ones that compete with your business, but think also about the other promoters who are in the market looking for potential investors. You need to be able to explain different routes that you are taking in comparison to your competitors and how you will mitigate their competition.

Some other aspects are connected with the concept of legal certainty.

  • Who and where you are: investors have to be able to easily identify you and know where to find you. That helps creating credibility and trust around your business and building the brand.
  • Always tell the truth: provide investors with only true and verified information. True information is always good information.
  • Show the rights and obligations: the terms of the deal are extremely important for the investor’s decision and are a proof of your company’s honestly.
  • Practical matters: be sure about having an efficient internal accounting and financial system and prepare all the documents the investors would need to sign. Think about all these aspects.
  • Protection: explain how you will protect the investor’s money.

The last advice is to be patient. If you want to attract the right investors do not speed things up as usually it takes several months to find them.

What can you do in the meantime? Revise and continue to analyse the above points and, even more importantly, keep dreaming the enormous possibilities and goals your business can achieve.

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