Get investor ready

HOW TO … Get investor ready

With Brijesh Roy, Seed Investment Manager, Imperial College London

The term ‘investor-readiness’ is widely used, but difficult to define. It’s not surprising that founders are unsure how to approach raising investment.

They have to think about every aspect of their business and often rely on their common sense and existing networks to make progress. Few, however, will have had any exposure to startup finance beyond TV shows like Dragon’s Den or HBO’s Silicon Valley.

As Seed Investment Manager at Imperial, I support founders from the College’s staff, student and alumni community to raise investment for their startups. In the six months since joining the College, I’ve met over 100 Imperial startup founders and their teams to offer them advice on financing strategy and raising investment. We’ve discovered fun and driven teams in seed-stage companies from deep technology to consumerdriven services and have made introductions to over 100 investors that make up the growing Imperial Startup Investor Network of angel and venture investors.

One of the questions I am invariably asked by founders is whether they’re ‘investor-ready’, and on the other hand, I regularly hear concerns from investors asking why so few early-stage companies are ‘investor-ready’. There’s a vast amount of fundraising advice available for startups, but many founders I speak to feel confused and find the advice is often conflicting. This is mostly because startup investors are a diverse bunch making decisions on different criteria.

Imperial’s Startup Investor Network ranges from high-net-worth individuals seeking to invest £10,000 of their own money after a few meetings to the professional venture capital investors who do months of detailed due diligence ahead of making a £10 million investment. Unsurprisingly, what each individual investor is looking for is different and what each means by ‘investor-ready’ is correspondingly different.

When it comes to early-stage investing, all the information is provided directly by the company itself. Founders need to clearly present the story of why they are raising investment, what they will do with the money, and explain why the investor should expect to make a profit. A five-minute slide presentation should be sufficient for an investor to do an initial evaluation to decide if your company is a fit for their interests and worth investigating in more detail. Many startups get this far with a polished pitch-deck or video, but then get stuck if an investor says they are interested to know more.

Investors are likely to ask a series of questions about specific areas of your business and want to see much more detailed information. Founders need to be prepared with relevant information about your business’ history and future plans, particularly detailed financials. The amount of information and the level of detail will vary hugely for each business. A sensible rule of thumb is that if something is critical to your business then an investor will want to see it and if one investor wants to see something, then others invariably want to see it too. If an investor decides to make an investment offer, then subsequent steps will involve signing legal agreements, and I recommend all startups get legal advice before going any further.

This summer we launched the Imperial College Innovation EIS Fund 1, raising £2 million, and from September will make investments of £100,000 to £250,000 into startups founded by College staff, students and alumni. We plan to make two investments every two months until the fund is fully invested, and I am lucky to have the principal role identifying companies and making investment proposals for the fund. For companies shortlisted, we will work with them to ensure that they are ready to present to our committee of seasoned investors, entrepreneurs and senior academics.

Any Imperial startup founder that is considering raising investment in the next year is welcome to register via our website for individual advice, access to the investor network and to apply to the Imperial Innovation Fund.

Find out more:

www.imperial.ac.uk/enterprise/ business/industry-partnerships-andcommercialisation/investment

Top tips for getting ‘investor ready’:

7. Engage in conversations with investors with confidence and a positive attitude whilst being responsive to feedback and requests for more information.

5. Prepare a data room with all your important company information eg, business plan, financial projections and legal documents – investors will want to see detailed information for evaluation and due diligence – be ready to share details.

3. Be prepared to tell investors how you will identify and reach your customers and who else is chasing these same customers – your competitors.

1. Remember you are raising investment– start by telling investors how much investment you are raising and when you want it. 6. Every investor is different and looking for different things. Make sure you seek advice and opinions on investment strategy from multiple sources.

4. Provide details of how you will use the investment, when you expect to raise further investment and give a clear rationale why their shares will increase in value.

2. Tell your startup story in under five minutes–what have you achieved and what are your plans for the company – remember, investors are buying a share of your company, not your service or technology.