Our top five tips on which fails could flounder your fundraising at the first furlong
Whether it’s on St George’s Day or not, raising finance can be likened to a battle. However, it’s easy to launch a successful campaign if you slay these dastardly dragons before you begin – though this does not involve a lance, a steed or indeed a prayer to the patron saint of entrepreneurs, St Homonobus (though that might help). Instead, here are our tips on how best to vanquish your fundraising fears, win the hearts of investors and ensure your strategy is as sturdy as your shield.
1 The knights at the round table: Your management team
It may be surprising, but the first thing that practiced investors look at – above everything else – is the people. If your management team is weak and inexperienced, it’s going to put them off immediately. The founders need to be on the exact same page and if there’s any disparity, whether it’s as to the future of the company, use of funds or indeed any mixed messages to potential shareholders, you’re going to be dismounted. Likewise, if there’s no ‘skin in the game’ – if your team hasn’t invested in your business, why should they?
2 Valuing the crown jewels
It’s entirely understandable that every founder and entrepreneur thinks their idea is the best thing in the realm. However, you have to be realistic when it comes to the valuation of your business – particularly as in times of economic uncertainty. Any economic decline hits the public stock markets first and the private sector always follows. At a time when investors may be less likely to dig deep, it’s crucial to get at least one offer (in order to signal to others that you’re of interest) and the easiest way to do this is with a reasonable – conservative even – valuation.
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3 The fantastical forecasts
As with the valuation of your business, you cannot present an unrealistic set of forecasts. A workable business model with the financials sewn up in an accurate, water-tight way is crucial. You’re right if you think investors are listening to your pitch primarily for one reason – they want to make money out of you. However, if you think you can blindside potential shareholders by inflating your proposition, think again. It doesn’t matter how shiny your presentation is, if the numbers don’t add up and the model is fantastical, potential investors will run a mile.
4 Lopsided legals
In 2019, it’s easier than ever to not rely on loopholes or inadvertent lawbreaking. The experts – in person or through digital sites – will take you through all the legal steps you need to cover before you begin your fundraising, such as whether you’re SEIS/EIS eligible (a hugely generous tax break scheme, specifically created to encourage investing) or ensuring that you’re seeking equity finance in a way that is FCA regulated. You’ll also need to prepare your Term Sheet, Articles, Shareholders’ Agreements and finally your Intellectual Property, a crucial factor in any future success. Ensuring that any patents or copyrights are filed – with no violation of rights – and being able to prove how your IP was developed and wholly owned by you, will be essential factors in securing your fundraising fortress.
5 Your battle plan
Before you get started on your fundraising journey, it’s essential that you first work out which approach is the most likely to result in success. There is no simple one-size-fits-all answer to this, so study the different options available. In 2019, there are dozens of crowdfunding sites to choose from (see the UK Crowdfunding Association, which can be a great path if you have a brand that people want to feel a part of. However, the time window in which to raise finance is often a small one and many sites require that you’ve already raised a certain percentage of your target before you can launch your campaign. If you’re an inexperienced entrepreneur with a start-up that is not yet well-known, you may want to seek equity through seasoned angels (learn more a through the UK Business Angels Association (UKBAA)) who will likely pledge upwards of £10,000, can sit on your board and advise you through their own expertise and knowledge of your sector. A great way to vanquish both these issues is to own a personalised platform: Envestry for Scale-ups allows you to hold the reins of your campaign: your crowd – or the crowd of over 3,000 angels registered with Envestry – can invest at any time of the day – or knight – in a round lasting as long as you choose it to be. In fact, Envestry will slay every dragon– the legal, regulations, financials, tax schemes, the lot – to take you to the highest tower of your fundraising fantasy.
Need to add extra shine to your fundraising armoury? Find out more about our customisable fundraising platform today.