33 Tips on Being Investor Ready

Poppy Higgins
Poppy Higgins
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33 Tips on Being Investor Ready

33 Tips on Being Investor Ready

Being investment-ready is about understanding and preparing for the due-diligence questions investors will be asking. There are several areas that need to be understood and prepared to achieve this.

Capital raising can be broken down into five stages:

  • 1. Drafting the business plan and investor material. 2 months
  • 2. Building a list of investors to contact. 1 month
  • 3. Qualifying the investors and identifying the right person in the firm. 2 months
  • 4. Contacting and getting to Pitch, responding to their various requests. 3 to 6 months
  • 5. Negotiating and closing the funding round. 2 to 4 months

Total time required:

Best case 10 months

Average Case 15 months

The Foundations:
Building the foundations of the business is critical to being investor ready
  • 1. Write a solid business plan that covers the company description, organization and founding team, problem, market analysis, solution, service or product, marketing and sales, funding requirements, use of funds, financial projections.
  • 2. Have the correct legal documents from the beginning, it gives the ability to protect the interest of the investors.
  • 3. Select service providers that cover all the administrative requirements for running a business.
Founding team:
Have founding partners that share the vision and have complimentary skill sets
  • 4. There must be a designated leader. Whoever is the CEO has to be accountable and be the person to stand up and speak to investors. If you want to be that person, it is you who's responsible for raising capital for your company.
  • 5. Investors invest in a founding team, with a concept idea. They believe in the founding team to execute that concept idea into a successful business. If they don't believe in the founding team, even if you have the world’s best idea, you probably won't secure funding.
  • 6. Diversity is important. Diverse backgrounds, in diverse roles, covering different aspects within the startup.
Financial plan:

If you do not have the requisite expertise then use a professional

  • 7. Make sure your current finances are up to date and that you understand them.
  • 8. Sit down with an expert (if you are not one) when you are building your projections.
  • 9. Your financial plan has to convince the investor, no matter how brilliant your idea is.
  • 10. Show 3 projection scenarios, high, average, low.
  • 11. Be realistic about your valuation, understand the objectives of investors.
  • 12. In the early stages dont worry about giving up equity, worry about raising the right amount to accomplish your milestones.

Finding investors:

Be prepared to give up your day job as this is a full time process

  • 13. When it comes to finding the right investor, the problem for a startup is the identification process. Qualify investors by making sure they actually have capital to deploy in new startups, and that they can invest in your jurisdiction, industry, deal stage, tech and for the amount you require.
  • 14. Ideally, you also need to understand who has the capacity to act as a lead investor.
  • 15. Understand what investors and venture capitalists are looking for from a deal structure and have all your documents in order.
  • 16. Find ways of getting in front of the right investment firms and the correct person in the firm using reputable channels.
  • 17. Be prepared for a lot of unanswered calls and emails; do not underestimate how difficult and time consuming it is to find the right investment firm and investment professionals in order to pitch them.
  • 18. Do your early stage funding rounds correctly by making sure you understand the details and implications of your term sheet and shareholder agreement.
  • 19. Before going out to see investors, make sure you are clear on the problem you are addressing and the solution you are providing.

Interacting with investors:

Keep to the point 

  • 20. Have thick skin.
  • 21. You have to learn to take on feedback.
  • 22. Redirect your next pitch to eventually hit the mark.
  • 23. Be prepared for questions, when you've put something in a document, understand it to back it up.
  • 24. If you don't know the answer to an investors question, be honest, do the research, come back to them. Don't give false answers on the spot.
  • 25. Educate yourself as a founder, understand the terminology.
  • 26. Every entrepreneur should know their business inside out and upside down. Speak about the salient facts and be precise about what you're doing/building.
  • 27. A big consideration to take on board is that this is an investment pitch, and investors are in it to make money, so make sure that each point has a commercial angle.
  • 28. Flow of the pitch :
    A. There is a problem
    B. This is my solution
    C. This is my target market
    D. This is my team who will execute these milestones
    E. This is my business model and client acquisition model
    F. These are my Financial forecasts
    G. And this is how much we want to raise to pull it off
  • 29. Never leave a meeting without asking and understanding the next steps.

Legal considerations:

Your Intellectual property is yours, judge carefully when you hand it all over

  • 30. It's hard to be a startup from a legal perspective, so protect your information as best you can.
  • 31. Be restrictive with information you give investors. Investors might be doing a bit of a shopping exercise, to understand a particular market to see where everyones at, and to pick the winner.
  • 32. The best confidentiality agreement or NDA is not the document but actually how much information you share.
  • 33. An idea isn't something you can protect. All you can do is market and actually develop it and get market share on that idea.

Preparation is key, explaining the problem and the solution is the focus of any pitch. Therefore making sure that the foundations of the business have been put together professionally and solidly will allow investors to focus solely on the actual business proposition.

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