After securing an initial round of seed funding or bootstrapping your startup yourself you might have scaled your company to a certain level but are unable to proceed further after your company hit its saturation point. To be able to secure investment, it is crucial for a startup to do their homework and approach second round of investment after they are fully prepared.
During every round of funding, a potential investor needs to know how well-run your company is, how is the company growing and how your activities and rationale for financial expenditures align to your goals and mission. Similarly, for someone to put money in your business, you will need to make a convincing business case that your business operations align with the investors’ financial and social objectives. Your business needs to come up with an investment pitch that is inclusive of all details that an investor will be seeking for. An investment pitch should be comprehensive and should include at-least the following five details:
Company Background is an overview of your company, which provides the investor with a snapshot of your business. This includes but is not limited to- company history such as the year the company was established, major milestones and achievements of the company, a list of major clients and a vision for next 5 or 10 years in terms of client base or market share. It is important for the investor to understand your company, its current standing and its objectives first, before making an investment decision.
This segment of your investment pitch should explain your strengths and why your company is good fit for investment including your identified areas of improvement. This analysis should provide an overview of your market, opportunities that exist in the market that could be exploited, and how your company would gain traction in the market and also potential threats and foreseeable impediments that may disrupt your business plan. It should also list out your major competitors and highlight how your business is different and able to outcompete other players in the market. SWOT analysis, done along with providing key metrics, gives the investor a realistic picture of your business and highlights advantages and potential risks of investment.
Business strategy contains a number of key steps that a business needs to take in order to achieve their goal. It is a long-term plan highlighting key activities that a business is planning to perform. It is an important factor in retaining or extending overall business. Business strategy is important for investors because it shows how the funds invested will be utilized to gain additional profit based on opportunities available to organization. Investors would like to know whether funds would be used for gaining additional market share, introducing new product line, acquiring competitor/supplier, etc. These plans should be based on strengths of your business and opportunities available in the market.
This is a key part of your investment pitch. It is important to include your audit reports and financial details so as to provide potential investors with an overview of your financial standing. This should include your revenue, profit, major cost headings and total Assets and Liabilities in past 3 years. It is important to highlight your current and past growth and spend rates so as to provide a picture of how your company has been evolving financially and scope of future growth. This provides the investor with the necessary financial details to assess the investment needs of the company.
Following key financial highlights of the company, the potential investor/s will look for a breakdown of how the funds will be utilized and how further investment will impact revenue or profit growth of the company. The investor will want to know how profitable the business is going to be after investment. So it is important to calculate profitability and expected return on investment to give a financial forecast. These metrics should be realistic and grounded on your previous financial details.
Overall, preparing a business plan is a first step in your investment pitch and should provide a comprehensive picture of your business model including its current standing and potential growth in future in order to secure and close the deal with a potential investor.