How to Prepare for an Investment Exercise

August 5, 2021

If you are looking to embark on an investment exercise and raise funds for your business (and have never formally raised investment before), you will need to go through a number of key preparatory steps to ensure you give yourself the best chance for success. Below, we’ve provided a list of what these are and what they involve.

 

1. Ensure you have a clear and credible growth plan with a use of funds

Having a detailed growth plan is an absolute must when when embarking on an investment exercise. Underpinning almost everything (the story in your pitch deck AND the types of investors you speak to), it needs to be clear, concise, and credible.

Clearly, there is a high degree of subjectivity involved (especially for earlier stage businesses with limited track record), and it is fair to say that no set of forecasts are ever ‘right’. However, a well-articulated set of assumptions with sufficient detail and thought behind them will carry a lot of weight when investors are determining the how backable you and your business are.

 

2. Prepare an investment memorandum (pitch deck)

When embarking on an investment exercise, the importance of ensuring your business is marketed correctly cannot be understated. Investors will want (and expect) to see a presentation that sets out the key information they need to determine if the opportunity in question is relevant and of interest. Key topics that should be covered include the business model, market positioning, competitive landscape / points of differentiation, the team, financial projections, and use of funds. An investment memorandum is often described as a “CV to get an interview” as it is designed to whet the appetite of investors such that they wish to explore the opportunity further in more detail.

 

3. Decide what type of investor is appropriate and identify the ‘right’ investors to approach

Before you “go to market”, you first need to identify which investors you are going to speak to! This will depend on stage your business is at, the funding requirements of the exercise, and your objectives too. Determining the ‘right’ list is probably the most important part of the exercise as there’s no point pulling together a business plan and presentation if you have no one to show it to!

Criteria you’ll want to evaluate when pulling together your list include: (1) industry preference, (2) investment stage, (3) investment quantum, (4) geographic preference, and (5) competitive portfolio companies (often investors won’t want to invest into something they already have exposure to). Once you are happy your list of investors is relevant for your business, you’ll then need to identify the right targets to speak to.

 

4. Get yourself due diligence ready

There is no escaping due diligence in any process as investors will want to verify the information they have been provided with before parting way with their capital. Many deals fall over at this juncture due to issues that could have been prevented with enough prior preparation.

 

5. Prepare yourself mentally

Raising investment is no mean feat, and the process from start to finish can be a bit of a rollercoaster. Running a process, while running your business, requires a lot of energy and can sometimes feel like a full-time job, especially when timelines are elongated. With this in mind, make sure you have considered the time and resource requirements, so you are fully ready for what lies ahead.

 

If you are thinking about embarking on an investment exercise and would like assistance to make the process as smooth as possible, get in touch with us today via this link or email us at info@blueboxcfg.com

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