Wow, what a ride these last few weeks! Banks collapsing, house prices falling, dire economic news, and suggestions that this is the end of Capitalism!
Just watching the news is enough for many of us to want to run and hide under the bed!
When I tell people that Central England Business Angels is tasked with sourcing equity finance for emerging companies, people just shake their heads and tell us they hope we have our CVs in circulation! But is it really this bad?
There is no doubt that this is a most difficult time to be a start up company. However, there are still active investors looking for opportunities.
CEBA has a number of both experienced “serial” investors as well as new Angels looking to invest in high growth companies. The question isn’t how do you find an Angel because CEBA can do this for you, but rather, the question is how do you impress them enough to convince them to invest in your company?
CEBA receives not less than 40 enquires for funding per month, and not less than 25 business plans per month. Of these we will personally interview approximately 15, yet only 3 to 5 may make the final cut for marketing to the Angels. Why do the numbers reduce so radically? The most effective way for an Angel Network such as CEBA to lose credibility is to have a reputation for sending on poor investment propositions to the market that are not fundable and only waste the investors’ time. Angels want to view a CEBA proposition because they know the opportunity has been vetted. What do you need to do to make the final cut?
As confident as you are that your business proposition and business plan is the greatest thing since sliced bread, Angels have “been there and done that” and can spot inconsistencies and reality gaps immediately. There are some specific issues we see way too often that will guarantee having a plan rejected. Unfortunately, these apply not only to Angel investment, but to all funding organisations, either debt or equity. The following are a few points to consider before you submit your business plan to any funding organisation:
As good as you are, and we are sure you are extremely talented, if you turnover £3,000 in your first year of trading it is probably not likely that you will generate £3m the second year.
It is equally less likely that you will achieve this reasonable jump in turnover without a sales plan, sales team, distribution, or route to market. It is better to present a modest growth plan and dazzle investors with success post funding than to assume excessive growth pre revenue. Please prepare a one page executive summary and not more than a 20 page plan. Nor will having the entire family on the payroll without job descriptions be easily accepted. Speaking of payroll, no one will pay excessive salaries that are not linked to revenue.
The number one reason an investment is achieved is the quality of the management team. Though education and experience are important, common sense and general management skills are critical. Unfortunately most “techies” don’t make good managers.
If you can’t manage the plan to success then it is better that you identify a manager to run the company. It’s important to CEBA that we can help you, the entrepreneur, to achieve funding. We are particularly experienced in knowing what Angels require to make an investment. We will be doing a series of articles focused on becoming “investor” ready to help make the process more user friendly.
For the Angels, we will explore what makes a good Angel investment, how to assess a plan for investment, valuation, and other areas of equity investment information that should be helpful to Angels. If there are any specific issues you would like us to address over the next few months please don’t hesitate to let us know.
For more information don’t hesitate to contact us at email@example.com
Pat Geraghty and David Clark
This column is sponsored by Advantage West Midlands. Others finance initiatives supported by the Agency can be viewed at http://www.advantagewm.co.uk/what-we-do/helping-business/finance-for-business.aspx