During our recent immersive technology investment accelerator competition, we ran various events around the UK to meet innovative, early-stage SMEs and talk to them about the opportunity to bid for grant funding from Innovate UK and private investment simultaneously.
We were lucky enough to work with eleven great investor partners on this competition, who shared the benefit of their expertise with the SMEs attending the events.
We asked them about some of the common pitfalls that companies encounter when they approach investors and they shared some helpful advice:
Know your investor
If all goes well, you could be entering into a long term working relationship with this investor, probably for many years.
Throughout the life of your business you are bound to experience exciting highs, as well as challenges and setbacks, and you’ll be going through these together, so make sure they are someone you want to work with.
It’s important to do your research and find out about the fund you’re targeting so that you can tailor your pitch accordingly and show how you could complement their portfolio.
- What types of businesses and technologies have they invested in previously, and what can you find out about their approach to working with their investees?
- How might your business contribute to the industries that they are engaged in?
- Look at their investment criteria, for example do they have any geographical constraints?
- What are their strategic objectives?
- Who is the key contact for your technology sector within that fund?
Each investor will have their own motivations and ways of working, so it’s important that you try to understand what might make that individual tick.
Be honest, and engage with them at the right time
Despite what you might see on Dragon’s Den, it’s very rare that one pitch to an investor will lead to a make or break decision on whether they want to invest in your business.
Treat your engagement with potential investors as an ongoing conversation, and take time to build a relationship with them. You would be wise to start the dialogue well before you are about to run out of money!
Communication and trust
Don’t be afraid to follow up if you haven’t heard anything within a reasonable time. Investors are busy people trying to run a business too, and sometimes you might need to be persistent in getting a response.
If you don’t follow up with a potential investor that could help your business, they may conclude that you wouldn’t be persistent in following up potential clients either.
On the flip side, make sure you respond to any requests for more information quickly, or explain if there will be a delay. Poor communication could mean you fall at the first hurdle and the deal never has the chance to get off the ground.
It’s important to be open and transparent from the very beginning of your relationship, so that you create trust from the outset. For example, if there are gaps in your team, or you don’t have the necessary licenses or rights yet, acknowledge these potential problems up front.
Any hidden skeletons will be discovered further down the line once things get more serious, and if the trust is broken you may lose that investor.
Perfect your pitch
Investors have to interpret huge numbers of prospective business pitches and quickly understand different trends, so make sure yours is concise, avoids jargon and clearly tells them what you are doing and why they should be interested.
Even in a short pitch, you should be able to communicate your business’ value proposition. A cold email containing a lengthy PDF and ten paragraphs may not get you that far. Grab their interest now and you can go into more detail about your business later.
Build a good business plan in advance, so that you have answers ready for the questions you are likely to be asked. Be realistic about the market size – just because everyone has a smartphone doesn’t mean they are all going to download your app. Make sure you can explain your access strategy for your target market.
Don’t try to hit every current trend or include every buzzword in your pitch. It’s better to focus on one thing and talk about how you might focus on others later down the line.
You should address the bigger picture and your long term plan; it’s great to show the investor that you’re ambitious, but be realistic about what you can achieve in the short term.
For further support on engaging with investors, and getting your business ready for investment, you can contact the Access to Funding and Finance team at the Knowledge Transfer Network or the Enterprise Europe Network .
Keep an eye on our website for future investment accelerator opportunities.
You can go to the Innovate UK website