Are you an ambitious entrepreneur that has a dream – but needs investment to make that dream turn into a reality?
If so here are seven questions you just have to answer if you want somebody to back you and your business.
…and if you are a potential angel investor these are the sort of questions you should be asking…
Fantastically generous tax breaks for investors have fuelled an investment revolution in the UK – with angels pouring money into small and growing businesses either directly or through a growing number of crowdfunding sites.
But so many businesses are not investor ready – even though they have great products and potential.
So for all those businesses and entrepreneurs out there that want investment – and there are plenty of them – here are seven questions investors ask and you need to answer.
What do you do and how do you do it?
I am still surprised that many businesses cannot clearly explain what they do in thirty seconds (in one meeting I still had no idea what it did a full thirty minutes into the explanation).
If you can’t succinctly say what you do, and why and how you do it – forget investment. And if investors can’t understand it, potential customers and suppliers will also be baffled.
What is the one thing in the world you do differently from anybody else?
A product, a service, a new way of doing things – what makes your business unique? Every business has competitors – so why are you different and better than them?
Why would I buy it?
This is a great leveller. Would I use the product or service and could I see other people using it? In other words, does it add enough value and is there a big enough market for it? Is the price competitive enough?
How are you going to sell it?
I have seen some brilliant ideas from some brilliant people – but they have no idea of their route to market. How to get out there, pound the streets and get somebody to actually sign on the dotted line. I am not a big believer in entrepreneurs saying that they only need to get 1% of a market to make a fortune (and I hear this with monotonous regularity). I want to know how a business is actually going to do it.
How are you going to protect it?
A lot of businesses don’t think about protecting their intellectual property through trademarks and patents. The better your idea or concept, the more likely a big company is to exploit it. Barriers to entry for competitors, or would-be competitors are key. If patents and trademarks are difficult, then establishing a user base, a brand, PR, credibility and customers can be other strong barriers to entry.
Is it a team effort?
I look for a full-time, committed, balanced team with skin in the game (i.e. they have put their own money, time and effort into the business). If founders are not willing to risk their own time or money in the company, why should an investor?
Where does the money go?
Is the business going to fritter the cash on expensive hires and flashy marketing or has it got a solid well-thought-out plan? What can it prove with the investment? Can it get to scale or get to profitability or prove enough to open the door for more investment? Focus is normally the key point, i.e. a focused plan and a focus on what matters.