Shalini Khemka, founder & CEO, E2Exchange, on how to secure investment to scale your business
Pitching for investment is hugely competitive. Not only do you need to meet the strict investment criteria to secure funding, but you will have to make your company stand out from the competition. At E2Exchange we run investor – entrepreneur pitch events and have outlined below the tried and tested methods used by companies who are successful in securing investment to take their business to the next stage of growth.
Secure the right funding and advice for your business
Be aware that different investors and funds have different return on investment (ROI) criteria and wide-ranging timescales for exit. Make sure that you target the investment you need and look at what advice investors will provide in the strategic direction of your business.
Seed funding, considered most suitable for higher risk start-ups, will usually require a higher ROI so you may have to part with a larger equity stake than you expected. Angel investors may want to be heavily involved in mentoring you and offering contacts while venture capitalists, providing pools of capital from funds will often require a non-executive position in exchange for an equity stake.
Ensure you have the right pitch team
The first impression will be a lasting one so think about your pitch team. Make sure that your key speaker is able to charm the investors to capture their interest from the outset. You should also present someone with a strong finance background who can give details of turnover, costs and forecasts. Finally a hands-on operations executive should be present to explain your business and the market opportunity in simple terms.
Do your homework on the investors – look into their careers and business interests – what stands out here? Have these been a success? By understanding what they are looking for in an investment you will be able to tailor your pitch to their needs.
Tell investors about yourself
Bring your pitch to life by telling your story. Explaining the circumstances in which you established the company may resonate with your audience and help set you apart from the competition. Shout about your past successes, what you have learnt and why you are worth their investment. By revealing your credible history and highlighting your personal network, investors will have more confidence in your ideas. Amer Hasan, CEO and Founder of minicabit, the mini-cab and taxi network which allows consumers to compare and book mini-cab taxi prices UK-wide, showcased the marketing and app skills learnt during his time at Vodafone to secure £250,000 in an early round of funding to launch the app. Remember that investors don’t just back ideas, they back the people who implement these ideas.
Get the numbers right
As your primary aim is to secure funding so present a solid financial model, which clearly shows how your business will make money. This is the most important part of your pitch and if the numbers don’t stack you will lose the opportunity. Ensure that you undertake thorough due diligence of your business, that the finance function is up to speed and, if you don’t have one, appoint a finance director, even if they are part time.
Explain the growth strategy
Convince investors that you have a well thought through strategy. Explain how you found the gap in the market, what you have done to create the right product and how you will grow the business. Demonstrate your knowledge of the market, it size and dynamics, growth potential and the competitive landscape. Show your investors how and why you stand out from the competition – if they can see this differentiation, you will be more successful in securing funding.
Outline how will you use the funds
Clearly set out how you will use the funds. Will you purchase assets to increase production to fulfil demand or spend the money on marketing? It is easier to quantify the ROI on an asset purchase and the perceived risk will be lower as you are likely to have already secured sales. If you need investment to market your products, which will be seen as higher risk, detail the marketing plan, costs, metrics and conversion rates. Outline conferences and events you are attending, trade publications you are targeting and how social media will support this activity. By explaining this activity in detail, you will instil confidence that you understand the risks, are spending investors’ money wisely and are more likely to achieve a return on their investment.
Understand what your business is worth
Seek advice from a corporate finance house as to the value of your business. This needs to be based on real metrics so a solid understanding of the financials, including forecasts, is essential. Familiarise yourself with valuations of recent deals and exits in your sector – reading your sector trade and private equity press will also help so you can confidently negotiate the desired valuation for your business.
These steps will help you to achieve the investment you require to take your business to the next stage of growth. However, nothing will happen without a bit of passion and if you can excite your investors, they will be more likely to back you. Good luck!
Shalini Khemka is the founder/CEO of E2Exchange, one of the UK’s fastest-growing entrepreneur networks which she formed to provide a powerful voice for entrepreneurs nationally. Shalini, a former senior director at Deutsche Bank Securities, is a successful entrepreneur in her own right – established the first online bank trade finance company with three Deutsche Bank colleagues, which they subsequently sold. Shalini was previously an Investment Director at LDC, the private equity arm of Lloyds Banking Group, and remains closely affiliated to LDC through LDC’s headline sponsorship of E2Exchange.