Introducing the pyjama pitcher and the armchair investor, new breeds of player in the early-stage investment space. But just who and what are they? They are the successful entrepreneurs who secure investment without ever leaving their living rooms; the au courant investors who build rich and diverse portfolios from the comfort of their favourite armchair.
Sadly, for the time being they are fictional characters. The good news is, you – the investment networks, the matchmakers, the accelerators – have the power to bring them to life.
We are living in anomalous times. Never before have we been unable to go to pitching events, have face-to-face meetings or shake hands. Activities once considered an essential part of any investment decision making process are now prohibited. So how, in this time of social distancing, can the early-stage investment market continue to thrive?
The answer is digital technology. And the good news is that they are already available and ready for you to adopt.
Matching entrepreneurs with investors has always been a relationship-centric activity, so it’s no surprise that the early-stage investment world has been slower to embrace digital than other industries. While the adoption curve has been a long, low-angled line, that is about to change. With the economy in turmoil, nervousness among businesses to spend and a predicted recession, the industry must adapt – and quickly. This will be a time of reckoning, a time of winners and losers. The winners will be those networks that embrace change and adopt digital to empower their communities.
What digital technologies are we talking about?
Digital investment platforms facilitate early-stage investing. Purpose-designed, they ease the process for all parties – the entrepreneurs, the investors and the networks themselves. Depending on the individual platform, they can cover everything from the investor certification process, deal promotion, due diligence to all transactions. Importantly, many of these come with built-in regulatory cover to comply with the Financial Conduct Authority (FCA), so networks can be assured that they are compliant with changing regulation. Ranging from custom-built to off-the-shelf, white-label SaaS solutions, these platforms can be launched quickly or tailored to individual needs.
Complemented by video conferencing software, of which there is no shortage of choices, these platforms will provide networks with everything they need to enable armchair investors and pyjama pitchers through this phase of social distancing and beyond.
Below, we delve into the benefits of these type of solutions for each of the key players.
Enabling the pyjama pitcher
Start-ups have simple needs when it comes to fundraising: to win capital investment without the exercise becoming the core focus of the business. To do this, they need to find the ‘right’ investors, while minimising the time they spend with those who ultimately decide not to invest. Digital investment platforms, which facilitate a one-to-many relationship, naturally support this. They allow entrepreneurs to create and promote their investment opportunities from a single location, which is accessible to all registered investors to browse at their leisure. With promotional tools supporting explainer videos, management profiles and showcasing traction, potential investors can easily decide whether they are interested. As investors dig deeper, due diligence is facilitated with secure data rooms that empower businesses to decide who views their confidential documents on a case by case basis. For any unanswered questions, built-in Q&A facilities allow investors to put specific queries directly to the management team, which can then be answered within the platform.
Importantly, entrepreneurs can track potential investor interest in real-time through analytics. This allows them to optimise their deal profile over the course of the campaign, with easy-to-use tools to help woo would-be investors.
Once wooed, investors can pledge investment and transact directly through the platform.
Naturally, potential investors will always want to meet with entrepreneurs. After all, the number one reason professional investors put their cash into a business is people. This is where widely available conferencing software comes in: affordable and typically web-based, this software facilitates investment pitching and one-to-one meetings.
With these technologies, entrepreneurs have everything they need to secure investment – from the comfort of their home and in their finest silk pyjamas.
Enabling the armchair investor
Investors want diverse portfolios. When they can’t get out to network and find opportunities, they need a mechanism to do so easily from the comfort of their favourite armchair. Digital investment platforms typically feature filtering functionality, which allows investors to drill down into the types of deals they are looking for, whether that be by stage, sector, region – or just about anything else. In this way, they can self-curate to hone in on those types of deals that will fill a gap in their current portfolio. When they find one that tickles their fancy, they can conduct their due diligence in real-time when it suits them, all without having to contact the facilitator and wait for a response. If they aren’t quite ready, they can ‘track’ a deal and receive automatic updates on the business’ progress.
Once an investor has decided to invest in a deal, built-in legals ensure they understand the commitment they are making, before allowing them to pledge. They then have the option of transacting through the platform.
Now a smiling shareholder, investors can manage their portfolio through the platform, including receiving updates from investee businesses. Then they can lean back in their favourite armchair and wait for the exits to roll in.
Becoming the future-proof facilitator
It’s clear that there are myriad benefits for investors and entrepreneurs in using a digital investment platform, but what’s in it for the networks? The good news is – a lot. Let’s start with the scary, dry stuff: FCA regulation. Ensuring regulatory compliance can be a minefield. The Envestors platform ensures you stay on the right side of the law and can provide “Introducer Appointed Representative (AR)” cover, to those who need it at a much lower cost . That means you never need to worry about falling outside of the regulations – we don’t recommend forgetting about it altogether, although we do recognise the temptation.
Another big benefit is a massive reduction in the amount of admin you have to do. Nobody likes admin, so why not get a computer to do it for you? With an investment platform, investor certification is self-service and automatically recorded. Investors can also update their own profiles in real-time, so if their situation changes, you don’t have to lift a finger. As covered above, platforms also manage document access, pledging and transaction – all things you can cross off your to-do list forever.
Now that you have a lot less to do, you can spend more time on the things that really matter: your investors. Most platforms will include a database where you can store investor preferences. So, while you’re home-based, you can hit the phones and ensure you know what kind of deals your investors are after. Once you’ve populated the system, you can easily curate deals based on interests and alert your investors to potential matches via email or phone.
Once you’re up and running and you become more efficient at matching investors and entrepreneurs, you’ll see improved satisfaction across the board – from your internal teams to your portfolio companies and investors. You’ll also know adopting digital was the right choice – not just for the short-term as we navigate our way through this crisis, but more so for the longer term as you’ve prepared your network for the digital future.