Seeking investment is a big step that will change your company. Before building investor lists and practising your pitch, it’s important to figure out if you’re really ready. Answering these questions now will save you time and put you in a much stronger position to raise successfully.
Are you personally prepared?
Angel investment is more than just a transaction; it’s a partnership that comes with new responsibilities and a loss of autonomy. Ask yourself:
- Are you prepared to own less of your company? Taking on investment means selling a portion of your company’s equity. You’ll own a smaller percentage of your business and you need to be comfortable with that trade-off.
- Are you willing to give up some control? Particularly as you get later down the line, external investors will often ask for a seat on your Board of Directors, giving them a say in major company decisions. You will no longer be the sole decision-maker.
- Are your long-term goals aligned with an investor’s? Among other reasons, angels are investing for a financial return. You must be prepared for this expectation and have a clear vision for a potential exit.
- Are you ready for investor relations? You’ll be accountable to your investors and will be required to provide them with regular updates on your progress, including financial reports.
Is your business ready?
Investors are wary of funding a company that is too early or hasn’t done the necessary work to reduce risk. That’s what funding readiness is all about.
- Have you developed the business enough? Have you done everything possible to advance the business, without outside capital? Ideally, you should have a minimum viable product and some form of early traction, such as user engagement or initial revenue, to prove there’s demand.
- Do you know how much money you need and why? You must be able to clearly lay out the exact amount of capital you are raising and provide a detailed breakdown of how those funds will be used to achieve specific milestones (e.g. we’ll hit £500k in revenue next year).
- Are your documents in order? Before you approach investors, you need a polished and compelling pitch deck. You should also have a clear set of financial projections, an understanding of your key metrics (like customer acquisition cost / marketing effectiveness) and any other supporting documentation ready to go, all organised in a data room.
- Do you have a deep understanding of your market? You have to be able to speak intelligently about your target market, your competitors, and what makes your solution different and superior.
If you can confidently answer yes to these questions, you’re in a strong position to begin your fundraising journey.