One of Yorkshire’s highest profile investors has advised companies seeking investment to be realistic with their numbers rather than ‘overpromising and underdelivering’.
That’s the view of Connie Smith, investment analyst at Mercia Asset Management.
Last year Mercia invested more than £23.7m in Yorkshire and Humber businesses and Smith lifted the lid on what they looked for in a company.
“Investors will see hundreds of pitch decks each year so we can spot those that are unrealistic very easily. We’d rather see a management team that consistently hits its relatively modest forecast each year than one that overpromises and underdelivers,” said Smith.
“During the due diligence process, we will dig into all aspects of your business, so being open about what we are likely to find is important.”
Smith recently closed an investment into Ilkley-based Eventum Orthopaedics and said they stood out for the ‘three Ps’ – people, process and product.
“These aspects are where the management team really shone through,” she said. “If we break those down into a little more detail, as a business can you answer the following questions?
“Do you have the relevant background to make this business a success? What gaps are you missing? Most VCs will have strong networks and be able to introduce you to people to support you on your journey but the first step to that is knowing what sort of experience you need.
“Do you have relationships with prospective customers? How will you go about forming those? Similarly with vendors and suppliers.
“In terms of process, do you have a plan in place for how you will create your product? Do you understand how this could change as you scale? Do you have a plan in place for when things go wrong?
“Finally, product. What is your product? How does it differentiate from others on the market? What problem are you solving?
“We want to see businesses that have something new and exciting about them, with a backable management team and strong market opportunity.”
Smith said Yorkshire is a good place for tech businesses.
“The Yorkshire tech scene is fast-growing with a number of initiatives being set up in the individual regions,” said Smith. “These are designed to support entrepreneurs on their journey to success so that they can stay within the region.
“The Yorkshire region still has a close-knit, homely feel to it. People want to help others, whether that is entrepreneurs supporting each other, people willing to share their experience or VCs who want to support businesses even if they can’t invest – the willingness to share information and advice is one of our greatest strengths.”