Securing investment at any stage can be tough. Throw in the fact that, according to reports, 2022 will be the year fast-growth UK businesses thrive from VC investment, then competition gets tougher.
Investors are selecting the most attractive businesses with low burn rates and a path to profitability. How do they choose who makes the cut?
Raising investment is becoming more competitive by the day: presenting yourself as the obvious choice, as someone who is dependable and grounded, will put you in good stead.
Founders sometimes question the need for a five-year business plan but it’s really the only way to lay out your projections and prove your plans are realistic.
In 2022, you’ll need to add another layer of planning to prepare to stand out. Investors will also be testing whether you know the investment scene and the challenges you might come up against.
Here are five things you can do to make sure your plans are future-proof and will show you in the best possible light to investors.
Strike a balance between reality and ambition
It’s important to balance what you’d love to achieve in an ideal world and what you can achieve in reality. Now more than ever, investors want to see that they’ll get a return on their investment to make it worthwhile, for example a 10x or 50x return in five years. They want to see a lot more ‘up-sides’ and positives to their commitment, and reassurance that you have ambition to grow.
If you present something wildly unrealistic such as a prediction that in five years’ time your revenue will be £100 million, that’s awesome, but statistically unlikely. That would make you a FTSE100 company, growing faster than Twitter, which for your company would be fantastic but for your investor, it’s often a red flag. Be realistic about what you can achieve, and in turn investors are more likely to invest, knowing they’re making a good decision for turbulent times.
Present a clear growth plan
You’ll capture investors’ interest quickly if you present your projections in a clear and digestible format. Showing a clear graph can help them picture your plans at a glance. However, what will most impress them is if your graph shows the right direction. The path to a unicorn is triple, triple, triple, double, double (two years of tripling your annual revenue, then three years doubling it). When you look at it that way, any company could be a unicorn, but the majority won’t be. If you’re showing what you would like to achieve, in a realistic way, you’ll be more likely to be remembered.
Make sure your numbers stack up
Obviously you need to show you’re numerate. If your calculations don’t add up, investors are going to begin questioning whether you’re right to invest in – they’d worry a mistake in your pitch is a sign of what’s to come. If you can’t get those numbers right, investors will think you won’t be able to run a successful business.
Forget profits – focus on tech to survive the first 12 months
Don’t make promises you can’t keep
Everyone knows that business plans are made up – when you’re starting out, you don’t have masses of data to report. However, these made-up stats need to be things that you can realistically live up to. You should be careful about your projections because investors often want business plans for two reasons. First, to help them decide if they want in, and second, to hold you accountable a few years down the line if you’re not delivering. To avoid this, make sure your plans are a true reflection of what you realistically expect to achieve.
Build scenario plans
2022 has shifted startup planning to a whole new level. Sure, no-one really knows what’s going to happen to the startup ecosystem But you can control how you react and adapt to external factors. Investors know you can’t control the wider industry, but you can show you’re ready to adapt by scenario planning thoroughly before you meet investors..
The good news for startups is that investors are ready to take a chance on you. You just need to step up your planning to persuade them to choose your company.