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5 Steps to Getting Investor Ready
Create your pitch deck and executive summary before contacting investors.
Your pitch deck is your marketing collateral and you should use it to showcase your business, team and investment opportunity.
We provide a free template pitch deck, and also a business plan canvas to help you create your pitch deck.
Tip: If you need help to polish your pitch deck simply apply for funding and we will provide some help to get your pitch deck looking smart for investors.
No one likes spam and neither do investors. Make sure you do your research, identify the right angel investors, venture capital firms, and family offices, that are best suited to investing in your business.
Once you identify who the investors are, spend some time researching their other investments, their preferred co-investors, geographic and industry preferences and how much they like to invest at a time. Make sure this research lines up with the profile of your business.
This report gives you some insights to what you should research when looking for investors.
Make sure there are no corporate, legal, tax or shareholder disputes.
Don’t expect investors to provide you with capital and fix any underlying and unresolved issues. Having said that if there are minor issues that are not too material then that is fine. If you are unsure, please contact us.
Investors like to invest in companies that have a clear strategy and have identified the milestones they need to reach.
Break down all the activities and tasks you need to undertake and create a milestone chart. For each key milestone, allocate the funding you need.
You need to convince investors the money you raise will be spent on the use of funds to achieve your milestones. Try to focus on a few key immediate milestones in your presentation rather than ones that are years ahead of time. You can always raise further capital at a later stage, if required.
Break down your milestones and funding requirements into manageable and realistic tasks.
Tip: Keep in simple!
Determine how much money you wish to raise and how much equity you will provide your investors. Setting a realistic price is important and if you overvalue your company you run the risk of investor turn off.
Here is one way to think about your company’s valuation:
Let’s assume you wish to raise $1M and want to provide investors with just 10% shareholding in your company. Valuing your company today at $10M.
What is the growth you expect to generate from the $1M investment? If you believe the investment of $1M will only increase the value of your business by 10%, then you can only afford to offer 10%.
However, if you believe the investment will more than double your business, then as long as you offer less than 50%, you are up on value for your shares.
We are not saying offer investors a crazy high shareholding, but rather be realistic based on the stage of your business. Also understand the value of the investment and risk-reward investors are looking for.
There are many factors that affect valuation including stage of business and cash flows.
As a general rule, we see most professional investors including venture capital firms take minority stakes in businesses that are ‘meaningful’. This is typically 10% to 35%. Avoid investors that want too much equity (over 45%) as you start to lose your incentive to run the business.
As you grow and have further injection of capital from investors your shareholding will go down but your valuation rises. Facebook founder Mark Zuckerberg for instance has a 28% shareholding but his company is worth US$500B. Below is the number of times Mark Zuckerberg raised capital for Facebook before listing on NASDAQ.
Pre-Money vs Post-Money Valuation. When raising capital, it is important to understand the following terms:
Pre-Money Valuation: This is the valuation before you raise money. In your pitch deck you should state you are raising $1M for $5M ‘pre-money valuation’.
Post-Money Valuation: This is the valuation after you raise money. Say you raise $1M on pre-money valuation of $5M. You post-money valuation is $6M.
We can help you come up with a valuation model that works for you and your investors. To get started and apply for funding click here.