For a start-up business at any stage of growth, the right investment at the right time can be the golden ticket to scaleability. It therefore follows that a business' ability to attract investors should be the backdrop against which any robust, realistic, long-term business plan is formed.
With this in mind, the New Entrepreneurs Foundation gathered a panel of David Gregson (a Senior Advisor for Phoenix Equity Partners), Gerry Murphy (Senior Managing Director of Blackstone Group) and Chris Hodges (Investment Director of Business Growth Fund) to share with us their thoughts on how to make our fledgling businesses attractive to people like them.
Here are my three key takeaways:
#1. Investors invest in people
The importance of good communication and mutual respect on both sides was a recurring theme across the panel. This works on two levels; first in terms of the personal chemistry that you have with investors, they are people too and want to put money/time into people that they can communicate with and that are credible and likeable. Secondly, in terms of the way your team works and gels together. Having a strong team and a good culture is a key ingredient to sustainable growth and as such is something that investors will examine closely.
#2. Are you operating in a high-growth industry?
Although you can go looking for investment yourself, if you start your business in a high-growth industry with a disruptive concept it makes it far more likely that they will come to you. Investors are always looking for new opportunities and to find them they look for emerging trends and rapidly expanding markets. If you want to make it easy for investors to find you, work out where those spaces are and make the most of them.
#3. Do you have a realistic business plan?
When looking for a business to put money into an investor wants to see where they can add value. Having a coherent and realistic business plan and a plan for how to expand your value chain makes that easy. Getting your strategy and learnings down is a necessary process in itself but is also key for investors to pinpoint exactly what challenges you are facing and how their experience can guide you. It will also act as a re-assurance and help you to communicate your key value drivers. The panel expanded on this citing the importance (post-investment) of managing expectations, particularly in terms of financials. It is far better, they said, to under-promise and over-deliver rather than make unrealistic forecasts that are then unfulfilled.
At the end of the discussion Neeta Patel (our CEO at NEF) asked what for me is the million dollar question: how many of the businesses that they are investing in are run by women? After a brief silence while they racked their brains, they concluded across the board that it was less than 10%. Sometimes these questions needed to be asked in public, concluded Neeta – and with the largest ever female percentage (40%) in this NEF years cohort they'd better watch this space.