Charlotte Thompson from KTN’s Access to Funding and Finance team introduces how to find the right investor for you and your company.
I am going to talk here about early stage investors, because by the time you are looking for late stage VCs you are more likely to understand what is needed and already be busy networking in the investor marketplace.
Before you begin…
Write a little note to yourself on the maximum number of shares you are looking to sell in your business and at what value. Call this your “walk away” position. This is a time and energy intensive process and time flies. It can easily take several months with 6 months being not uncommon. In a few months’ time when you get to negotiating the deal, cash flow is tight and you have salaries to pay, it’s worth having in mind what was on that little note and whether you need to walk away..
Personal connections
The first and best way to find investors is through good old fashioned personal contacts. Ask other early stage company leaders who invested in them and ask for warm introductions. Like sales and recruitment, LinkedIn has helped transform this process. Similarly expect LinkedIn to be used in the Due Diligence process on your company. Sometimes I get phone calls from potential investors asking me for my informal thoughts on people that I am connected to on LinkedIn.
Your support networks
Another source of warm introductions are the various innovation networks made up from accelerators, incubators, the Knowledge Transfer Network, Enterprise Europe Network and Catapults. See what events they are organising and be ready to network hard. Raising funds can be a full-time job for early stage founders, so it is perhaps worth thinking about bringing on board a Chief Operating Officer to look after the day to day running of the company, while you concentrate on the fundraise.
A little health warning
Please be careful about laws regarding the promoting of investments. In the UK, that would be Section 21 of the Financial Services and Markets Act 2000. This includes oral or written communication, including websites. If found in breach of this act you can face fines and even imprisonment. It is easy to stay within the law, but you do need to be aware. Do not let your enthusiasm innocently get you into trouble.
Communication preference
Many investor networks and institutional investors provide information on their websites about how they can be contacted. It is better if this is through a warm introduction from intermediaries or other founders. Check out their websites to see what their investment focuses are and how to get in contact.
Perfect match
Do you know what sort of investor you want to join your team? It’s worth doing some research into companies like yours and find out where they have received funding at your stage of growth. Sources such as Crunchbase and Beauhurst can help gather this information.
Investor funnel
Finally, fundraising will feel hard. You are likely to hear many no’s along the way. Just as when engaging with customers in your sales funnel, make sure your investor funnel is top heavy to ensure a greater trickle-down effect and chance of success.
Of the many no’s you might receive, some people like to give constructive feedback as part of the rejection, however much of it will seem contradictory. Once you have heard the same feedback three times, then make the change to your investment proposition.
Good luck in finding the investor right for you.
– By Charlotte Thompson, KTM, Access to Funding & Finance