Do you think you're ready for investment - but you don't know where to start? SUS19 exhibitor, Social Investment Scotland (SIS) has all the info you need. In his blog, Rob Halliday, Lead Fund Manager at SIS, reflects on what makes an excellent investment as young companies look for the funds they need to go from startup to scaleup.
We’re looking at opportunities and giving entrepreneurial management teams a chance, through investment and support, to achieve their growth and impact aspirations. Having invested in our first few mission-led businesses (including Startup Summit Competition finalist, Talking Medicines) and having met many entrepreneurs looking for investment to take their business to the next phase of growth, we’ve been reflecting on what makes a compelling young company investment opportunity, particularly in terms of this year’s Startup Summit themes of People and Process.
From what we’ve learnt and the common threads we’ve seen between compelling investment opportunities and less compelling ones, we’d like to share five key reflections which we hope are of value to management teams of young companies getting out the gates and hoping to seek investment in the future.
1. Build a network of advisors and advocates.
Grow your network of advisors and advocates and be sure to listen to what they have to say. As you’re out and about networking, pitching and selling, you’ll meet professional advisers, people from the industry and experienced entrepreneurs that have taken their business from idea to success.
The best teams that we’ve come across have built and leveraged a sound network – people are, by and large, generous with their time and like to help where possible. The less successful teams are those in a bubble or with an on-paper network which they don’t or can’t utilise. What use is a former blue-chip company CEO as your Chair if they can’t spare a couple of hours a month to impart their advice?
Having a sound network allows you to learn from others’ experience, demonstrate to investors that you have experienced people around you that see something in your business and gives you much greater reach for opening doors that you wouldn’t have known existed.
It’s natural that your network will change over time, but remember, some of your early advisers may well become investors or board members in the future.
2. Engage with prospective customers sooner rather than later.
An early customer win is the best validation a young company can have. Be clear on your value proposition, what the problem is, and how you have the solution.
As an investor, we’re interested in game-changing solutions, not incremental improvements to a product or service that already exists. These interests aren't the same for all investors, so understand what they’re looking for and use prospective customer validation to back up your proposition.
3. Don’t approach your top three investors first.
It’s essential to have a coherent strategy for fund raising. After your initial approaches, you might well want to incorporate feedback into your business plan/investor desks to reposition aspects of your business (for example, key risks).
Take the time to look at each angel syndicate’s and VC’s investment criteria and whether you’re a good potential fit. Talk to the investors that you would most like to work with or think are the best fit later in the process. This approach will allow you to better position your business to the investors that you would most like to work with.
4. Take ‘no’s in your stride but listen to feedback.
Having spent last summer raising capital for SIS Ventures, we know what it feels like to fundraise – not everyone you speak with will like your idea or think that it’s a good fit for them. Investing is inherently subjective. Different investors have different priorities and experience, so you won’t be right for all, or perhaps even the majority, of them!
Stick at it, be sure to listen to feedback and take it on board. You'll be on the front foot with common questions and concerns.
5. Make use of the entrepreneurial ecosystem.
Scotland is right up there with the best places in the world to start a company. Events like Startup Summit and competitions and pitching events like Converge Challenge, Scottish EDGE and EIE are fantastic for raising your profile and non-dilutive funding. These are opportunities to speak to a broad audience and for early investment gained to move your business to the next stage.
Engage early, build good relationships and know what’s available to you.
Got a burning question about investment? Social Investment Scotland will be exhibiting at SUS19 - don't be shy! Get your ticket now to make sure you don't miss out on our inspiring speaker line-up and exhibitors marketplace on 30th October at the Assembly Rooms Edinburgh!