Getting expert advice, identifying the right investor, and ensuring the business is ‘investment-ready’ becomes paramount in the pursuit of growth funding. Rafi Khan, Investment Manager at Maven, explores 8 things to consider as a small business seeking equity investment.
A robust pitch deck is not just a presentation, it's a powerful tool for evaluation internally and a guide for potential investors externally. Ensure it covers all necessary elements, presenting a clear picture of the problem, solution, sales strategy, traction, competition, team, and financials. It should be a given, but ensure that the formatting, spelling, and grammar is perfect. A professionally presented pitch deck serves as your company's first impression.
Be prepared to deliver an informative, relevant, and engaging presentation. Anticipate the questions and concerns that investors may have and show the potential benefits of their involvement in your business. Investors will be interested in your personality too, so be enthusiastic and passionate about your product / service and its potential, without being unrealistic about its prospects.
Evaluate the potential market size and demonstrate a focused business strategy with a clear revenue model. Dispel the notion of "if you build it, they will come." Actively secure customers to show market interest, alongside developing your pipeline. Articulate how your product or service fulfils a customer's need and clearly communicate your company's role and differentiators compared to your competitors.
Financial accounts and forecasts play a pivotal role, both in terms of demonstrating how your business will develop, but also as a point of reference for investors looking to model potential future returns. Realistic assumptions and built-in contingencies enhance your credibility. Demonstrate that you are fully aware of the marketplace you operate in and show financial projections to support what you have said.
Consider engaging with a business advisor as an investment rather than an expense. Their insight can save valuable time and money, helping to streamline the funding process. Time spent seeking funding is time away from running the business. Advisors will aid in focussing your efforts where it matters.
Research various funding options, leveraging resources like local Growth Hubs and accelerators, who can provide help and advice. Define your funding needs, the timeframe for equity financing, and be specific about the purpose of funds being raised. Is it to hire senior talent, build out your support functions, or invest in research and development? In turn, what will this achieve? You should also be realistic about the time required, especially for the initial round, factoring in how prolonged periods of cash-burn will impact your business.
Beyond monetary support, consider the additional benefits you seek from a private equity backer. Look beyond the amount and valuation, and you will see that equity funders can add value through strategic input, operational support and networking opportunities. Some investors are also sector-aligned, and so thorough research is vital particularly for more complex or niche businesses, to ensure your potential funding partner can add meaningful value aligned with your business vision and goals.
Receiving an offer is a great achievement but evaluate whether the investment aligns with your company's needs. Assess terms critically and ensure the investment supports growth and/or helps the business to reach specific milestones. Is there sufficient cash headroom? Is there the opportunity for follow-on investment? Does the amount still make sense, especially if there has been a lengthy passage of time from the first conversation?
By considering these practical steps, businesses can navigate the complexities of equity investment and foster successful partnerships with potential funders.
Maven is one of the UK’s most active private equity investors and is passionate about working with ambitious businesses to achieve their strategic goals and maximise growth potential. If your business, or the business you advise, is looking at equity as a solution to fund future growth we would love to hear from you. Speak to one of our investment team by getting in touch at funding@mavencp.com.