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Finding Finance

Funding the start up business can present a multitude of problems! Revenues from consulting, whilst developing a product, can extend product development times but has the advantage of soft-starting the business whilst developing a potential customer base for your newly developed product. Once the decision has been made to seek external funding, prepare for a long, and potentially heart wrenching slog that may, or may not, have your desired results; the fund raising process is not easy. The process requires careful and thorough preparation and a determination to succeed; without it you will not achieve success.

What is an investor looking for?

An investor is generally looking for a product or service that is unique and is hard to copy, ideally that is protected; a customer with a compelling need for that product or service; a large enough market with enough potential customers; a management team capable of maximising the opportunity and an exit for the business, by trade sale or IPO (Initial Public Offering), in about 3-5 years time that will provide a good return on their investment.

Preparing for Funding (The Art of Finding Finance)

Stages of Finance

The sources of finance from start up to maturity can be described by the following stages:

  • Your own money (investors like to see founder money in the business as well as revenues),
  • Friends, family and fools,
  • Business angels/seed funds/grant funding,
  • Early stage VC,
  • Expansion capital/Pre IPO (Initial Public Offering),
  • IPO

The Preparation

Preparing the Product or Service

Investors generally like to see a prototype product or, even better, a product that already has a number of customers; getting to this stage is not always easy in an under funded company and could be viewed as a ‘chicken and egg’ situation but where there is a will there is a way. Initial funds to create that product may come from your own sources, family and friends and through income from the business itself.

Preparing the Team

Investors like to see a well-formed management team capable of driving the business forward. The team does not have to be complete but you should know what skills are missing and have a realistic strategy in mind for filling those vacancies. It is not easy to get on board the management skills needed to attract investment but entrepreneurs are skilled in the art of ‘conjuring something from nothing’ and will find a way of getting the people they need.

Preparing the Business

The funds raising process is for but a few people long, hard work and will test your strength of will and courage on more than one occasion. So get determined and get fit, be prepared to be knocked back. The time spent in preparing for funding is likely to mean taking your ‘eye off the ball’ of running the business for a considerable amount of the working day. Make sure your daily tasks are covered; delegate wisely and don’t be afraid to hire help if you can afford to. Your clarity of mind in the fund raising process is more likely to mean success.

Preparing the Documentation

The crux of all fund raising projects is the documentation that goes alongside. Crucial is the ‘door opening’ Executive Summary; the business plan summary that may get you to the all-important investment meeting. But let’s start with the business plan as that is normally the document that is prepared first.

The Great Business Plan

The Business Plan tells your reader about your business and its future strategy. It needs to be readable; ideally your reader should enjoy reading it. It must avoid technical jargon, be written in clear English (or whatever language your reader speaks), laid out pleasingly, spelled correctly, be succinct, be factual and truthful, and tell the reader what they want to know about your business. If it isn’t, you run the risk of your plan being added to the pile of business plans being used as a door stop. 
The Great Business Plan

The Business Plan tells your reader about your business and its future strategy. It needs to be readable; ideally your reader should enjoy reading it. It must avoid technical jargon, be written in clear English (or whatever language your reader speaks), laid out pleasingly, spelled correctly, be succinct, be factual and truthful, and tell the reader what they want to know about your business. If it isn’t, you run the risk of your plan being added to the pile of business plans being used as a door stop. 
The Great Business Plan

The Business Plan tells your reader about your business and its future strategy. It needs to be readable; ideally your reader should enjoy reading it. It must avoid technical jargon, be written in clear English (or whatever language your reader speaks), laid out pleasingly, spelled correctly, be succinct, be factual and truthful, and tell the reader what they want to know about your business. If it isn’t, you run the risk of your plan being added to the pile of business plans being used as a door stop. 

The Great Business Plan

The Business Plan tells your reader about your business and its future strategy. It needs to be readable; ideally your reader should enjoy reading it. It must avoid technical jargon, be written in clear English (or whatever language your reader speaks), laid out pleasingly, spelled correctly, be succinct, be factual and truthful, and tell the reader what they want to know about your business. If it isn’t, you run the risk of your plan being added to the pile of business plans being used as a door stop.

An overview: The Executive Summary, covered below.
The Company
The Product or Service
The Market
Staff and Reporting
Financial Information and Projections (in words and graphs)
Risk Analysis
Appendices, which may include:
    Statutory Accounts
    Cash Projections
    Details of your advisors
    Technical Details
    Glossary of Terms
    Financial Assumptions and Model
    Revenue Assumptions
    Cost Assumptions
    Management CV’s

The plan should be about 20-30 pages in length no more.

The Executive Summary
The Executive Summary is the key document for getting an appointment with the investor. When you make contact with the investor they will normally ask you for your Executive Summary; if they like what they read you will probably be invited to come and make an investment presentation. The Executive Summary is in essence a sales document and should contain the highlights of your business plan, the sub-headings are those from the business plan but the text should highlight the major points. It should be no more than 2-3 pages.

Make an attractive proposition and you will be invited to make an Investment Pitch.

An outline Business Plan and Executive Summary can be found from the Services>Business Plans page. An outline Investment pitch can be found on the Services>Business Presentations page of this website.

As well as preparing a good investment presentation you will also need to prepare your 'Elevator Pitch', this too is covered on the Services>Business Presentations page of this website.

Preparing for the Investor Meeting

Practice, practice, practice!

Practice your Elevator Pitch and your Investor Pitch. If an Investor Pitch know your audience. Is it a single investor you are presenting to or a network of business angels? If a network of angels what is the format of the presentation pitches, you will not be the only business presenting, how will they pick you? And will have an allocated time slot which can vary from 2 minutes to 20 minutes, get the timing right. How long will you have with a single investor; 20 minutes, 30 minutes? Find out before the meeting and go in prepared. Develop your pitch accordingly and practice trial questions. Try out your pitch on someone who knows nothing about your business, particularly of it is a very technical product; do they get it? If not, change the pitch!!

Go smartly but comfortably dressed. You need to feel confident and making a pitch is a nerve racking time; feeling at ease is most important. Getting across your personality it most important; if the investor does not like you they are not likely to invest. Learn how to control your nerves. We each work differently in a stressful situation so know yourself and what works for you. Maybe it is a breathing technique or maybe like, Scott McNealy (ex CEO of Sun Microsystems and from his book 'High Noon') you prefer a ‘fight’ with someone to give you that edge to present well.

Go to the meeting and try to be your confident (not arrogant) self, if it is a one to one meeting then greet the investors or whoever is in the room; introduce yourself and shake hands; a warm firm (not knuckle-breaking or weak!) hand shake, shows your confidence and a lot about your character.

Presenting is not easy for ANY OF US! It is not a naturally occurring talent in most people. Good preparation is they key to delivering an expert pitch and controlling nerves. Remember the presentation is for your audience NOT for you, cover what they need to know, not what you want to tell them! The image you project is a combination of what you say, how you say it and, most importantly, how you look when you present (your body language, eye contact as well as your dress).

It is most important that you project a professional image both online and offline! We’ve already talked about the brand of your product or service but what about your own brand? As well as selling your product or service and its opportunity to the investor you are also selling yourself; so consider carefully how you wish to project yourself; what is your own brand and how will you project that through your dress, speech and manner?

So well-presented, rehearsed and with documentation, investor pitch and elevator pitch prepared you are ready to go out and find the investors.

Approaching the Investor

Finding the Investor
Firstly, you have to find investors, this is not an easy task starting from a point of zero knowledge but Google and your business networks will help. A list of appropriate websites will be provided elsewhere in this manual.

Getting the right investor for your business is essential; they need to be right for you in the same way that your business must fit their investment criteria so do not be afraid to research them and their history. Use your networks to find your local VC’s, business angels and business angel groups. Just keep asking questions until you have built up a list of potential investors.

The ‘Gatekeeper’
If you can find the gatekeeper, someone who can pave the way for your call to the potential investor or seek out a ‘champion’ to open the doors and make an introduction for you your job will be a whole lot easier. This person may be part of your management team, someone from a business school where you have studied, someone from an incubation centre or possibly another entrepreneur who has already found funding and can introduce you. Think creatively as a soft introduction will make your job of getting appointments a whole lot easier. But if you can’t find someone to help you then you must open the doors for yourself!

My ‘Investment Project’
Finding investment finance is not unlike any other business project and should be managed in much the same logical way.  Build a list of VC’s, angels and angel groups that you plan to approach, with a contact name, contact details, date of contact, response, response date, next action, what documents were sent and maintain your records. Finding investment will be a lengthy, time consuming project and needs to be managed carefully; don’t get double booked!

You will need to make a telephone call to the investor and have your elevator pitch ready. Your objective is to be invited to send in an Executive Summary. If this is managed successfully then if you have not heard from the investor within a week call them and ask if they have received your document and if they have read it. This contact all helps to get your name remembered. Your objective is to get a meeting where you will give your investment presentation.

You may or may not require your proposed investor to sign a Non-disclosure document, samples can be downloaded from the web or you may ask your lawyer for a copy (there may be a charge!)

The Meeting
If you are offered a meeting, ahead of it ask what is expected of you. How long do you have and how the meeting will be structured, prepare appropriately; if your presentation is ready and rehearsed it will not take long to adjust it to fit an allocated time. In the meeting after the usual introductions you will be invited to give your presentation, sometimes the investor will start by telling you about themselves first, after your presentation the investor will ask you questions about anything that is not clear or where they want to know more. If you prefer to stand and present, ask if this is ok with them, and do so; remember you must feel confident and comfortable. If you prefer questions as you go then invite them; if not then ask that all questions remain until the end of your presentation. When you are ready for questions say so. Investors asking questions, whilst not an indication of success, is a good sign. At the end of the meeting find out what you can expect from them, what is the next step; don’t walk away not knowing and make sure you follow through! Don’t be afraid to ask questions of the investor, find out what you need to know and how long will they take to make a decision, have you covered everything they want to know about you and your business.  If you are giving more than one presentation in one day remember each has to be fresh and upbeat no matter how tired you are.

After the meeting don’t wait to be called; give them a week and if you have heard nothing pick up the phone and call them; email is not so personal and you are less likely to be remembered, so go on call them. After a week chances are they will still remember you, give it longer you may be ‘lost in the crowd’. Have they made a decision? If not do they need any more information? Are they interested? Yes – great news, what next? No – why not; can they offer any advice or suggest anyone who may be interested; it is not a closed door!

Handling Rejection and learning to PERSIST!
You will, without doubt have to face rejection and being told ‘no’ is bitterly disappointing, especially in the first few meetings. Tenacity is crucial for any funding project, don’t give up at the first rejection use it as a learning experience and ask, ‘why not?’ Whilst it hurts for a while, get over it quickly and take on the positive; take on board the response and if you believe the response to be valid make adjustments so that criticism cannot be leveled at you again. If you disagree put it down to the fact that that investor was just not right for the business; there needs to be a ‘meeting of minds’.

Handling Success: What Next?
Once you have an interested investor it is time to start building the relationship; find out about them and what they can bring to your business outside of the money. Make sure there is a good working, mutually supportive relationship before you sign up the deal. If they plan to put a non-exec director on your board, who is it, what skills do they bring, will they work well within your team; if the answer is ‘no’ don’t be afraid to say so, realising the problem now and finding the solution is far less painful than later in your company development. During this period you will also be refining the structure of the deal; how much investment for how much equity and in what form.

The Offer
Once the investor has made a decision to invest you will receive a document called a ‘Heads of Terms’ or ‘Term Sheet’ which is a simple document outlining the structure of the investment deal which will most likely be subject to due diligence.

Due Diligence
Does it really work, and is what you say true? Before giving you the money the investor will want to know that what you have told them in the presentation is actually true and will start a process to check out the business. This will include technical due diligence on your product, legal due diligence on your contracts and possible personal due diligence on you and your team; do you have the capability to drive this business forward. It can be an unsettling process and is very time consuming. More information on due diligence is covered in the finance section of this manual.

Documentation
A number of documents will need to be found or created; these will need to be reviewed, agreed and some signed by both parties once you have found a potential investor and your funding deal is likely to close successfully. This not a definitive list and will differ depending on the stage of finance and the location of your business, essentially the list includes:

  • Director’s service contracts, in a first round funding these are very likely to not exist and need to be created. Investors may also require the directors and any key staff to hold key man insurance.
  • Employment or service contracts for all staff.
  • Consultancy agreements if the business uses any help from outside the business and sometimes the incoming VC will request a consultancy contract.
  • Term Sheet (a document that covers the fundamental terms and conditions of the investment),
  • Shareholders agreement (an existing shareholder agreement will be need to be changed to reflect the incoming investment),
  • Optionally an share option scheme may be set up,
  • The original company documents will be reviewed and may be changed (the names of these documents very from country to country).
  • Certificate of Incorporation plus documents that denote any changes that have happens since incorporation, such as a name change.
  • Business plan, prospectus or investment memorandum.
  • Share certificates.
  • Due diligence reports.
  • Accountants report.
  • Board minutes for the transaction.
You will need to appoint a legal firm to act on your behalf and the time taken to prepare for funding should not be underestimated, gathering the information can be a lengthy process. Funding is a formal process and anything taken on trust, such as founder’s working without service contracts, will now need to be documented and formalised.

Post Investment
Assuming all goes well in the due diligence process a date will be set for the signing of the legal documentation and the transfer of funds. From that point on there are new owners of the business who will, most likely, have a say in its future. Their involvement may be day to day but if it is a ‘hands off approach’ there will be scheduled reports that you will be required to send probably on a monthly basis.

Other Useful Information
YouTube: Silicon Valley entrepreneur and venture capitalist, Guy Kawasaki, gave a speech at StartWorks, Silicon Valley in Spring 2008. This is part 1 in a 3-part series. (c) 2008 John Montgomery.

http://www.youtube.com/watch?v=1etQC2-Vg_s
http://www.youtube.com/watch?v=uFDnT_xgqJ0&feature=related
http://www.youtube.com/watch?v=UwMNlJJBVZk&feature=related

Approaching the Investor Check List

Assuming you have prepared your business in terms of product and management and are now ready to seek investment before starting on ‘your investment project’ ensure you have the following:

  • Clarity about the amount of investment you seek, what the funds will be used for and how much equity you are prepared to sell (but be prepared to negotiate).
  • What you seek from the investor, a NED position, consulting contract; what you want and what you may have to accept becomes another point for negotiation.
  • A business plan with at least 3 years of financial projections.
  • An executive summary that stands alone as an independent document.
  • A memorable and well rehearsed investment presentation.
  • A ‘gatekeeper’ if you can find one to open the doors for you.
  • A researched list of investors who invest the amount of funding you seek and invest in your market space; you must be in their investment criteria, don’t waste your time or theirs.
  • An ‘Investment Project’ plan; Your list of VC’s, angels and angel groups that you plan to approach, with a contact name, contact details, date of contact, response, response date, next action, what documents were sent and maintain your records.
  • A rehearsed telephone first contact call, not scripted but get your message across concisely and get the invitation to send in your executive summary.
  • A follow through telephone contact, in case you need it to get that first meeting.
  • A personal memorable image for the initial meeting; the greeting smile, hand shake, body language and clothing (be smart but comfortable, be you!). You will develop your own style as you become more familiar with giving presentations.
  • And finally, have plenty of tenacity. Unless you are very lucky you’ll need to keep ‘knocking doors’ to find that first investment but the journey and learning experience will be worth the effort you put in.

Articles

Technology Innovation Funding & Exits: From DotCom to Today supplied to Cambridge Business Weekly in July 2008.
An overview: The Executive Summary, covered below.
The Company
The Product or Service
The Market
Staff and Reporting
Financial Information and Projections (in words and graphs)
Risk Analysis
Appendices, which may include:
Statutory Accounts
Cash Projections
Details of your advisors
Technical Details
Glossary of Terms
Financial Assumptions and Model
Revenue Assumptions
Cost Assumptions
Management CV’s
An overview: The Executive Summary, covered below.
The Company
The Product or Service
The Market
Staff and Reporting
Financial Information and Projections (in words and graphs)
Risk Analysis
An overview: The Executive Summary, covered below.
The Company
The Product or Service
The Market
Staff and Reporting
Financial Information and Projections (in words and graphs)
Risk Analysis
Appendices, which may include:
Statutory Accounts
Cash Projections
Details of your advisors
Technical Details
Glossary of Terms
Financial Assumptions and Model
Revenue Assumptions
Cost Assumptions
Management CV’s





An overview: The Executive Summary, covered below.
The Company
The Product or Service
The Market
Staff and Reporting
Financial Information and Projections (in words and graphs)
Risk Analysis
Appendices, which may include:
Statutory Accounts
Cash Projections
Details of your advisors
Technical Details
Glossary of Terms
Financial Assumptions and Model
Revenue Assumptions
Cost Assumptions
Management CV’s

The plan should be about 20-30 pages in length no more.

The Executive Summary

The Executive Summary is the key document for getting an appointment with the investor. When you make contact with the investor they will normally ask you for your Executive Summary; if they like what they read you will probably be invited to come and make an investment presentation. The Executive Summary is in essence a sales document and should contain the highlights of your business plan, the sub-headings are those from the business plan but the text should highlight the major points. It should be no more than 2-3 pages.

Make an attractive proposition and you will be invited to make an Investment Pitch. An outline Executive Summary can be found within the template business plan.

The Investment Pitch

C Gary Larson: The Far Side.

The length of the Investment Pitch varies according to the type of meeting; whether it is one to one or one to many; business angel network presentations will have a clearly defined timing to which you must adhere. Most investment presentations range form 8 to 12 minutes and can be given with or without PowerPoint slides. If you chose to use PowerPoint take careful note of the Ignite presentation that referred to how to create a good slide layout. For Ignite your presentation should last no more than 10 minutes. The points you must cover in your presentation include:

Introductions: Who are you, the business name and what does the business do, stated very clearly and understandably.

What is your Vision Statement? State it clearly and with passion, if you have crafted it correctly it will not need explaining! You should a vision statement prepared from a previous session.

What is the problem/pain or need are you addressing? Why will customers buy your product; or why are they buying your product. What pain do they have they your product solves?

What is the product or service? Describe the product or service so that it may be understood by someone who is non-technical but provide enough information so that they understand the uniqueness and specialty of your offering. Do not go into deep technical detail; leave this for interested parties or questioning after the presentation.

Who is the customer? Who are your customers and what need are you satisfying? What evidence do you have that your product/service is effective and customers will or are buying at your set price. 

What is your competitive advantage and how is that advantage protected? Why will people prefer your solution customers ahead of someone else’s; what is the strength of your competitive advantage. How will that advantage be protected and how ill it continue to be protected in the future; have you registered IP (patent, brand, copyright, license, trademark) or is the expertise required to create the product or service hard to copy?
 
How big is the market? You must provide numerical evidence that there are more potential buyers for your product; what is the size of the market, what portion of the market will you address, what market territories will you address, how many are likely to buy your product and based on what evidence. 

What is your go to market strategy? How do you plan to make sure your potential buyers know about your product so they can buy it? How will you tell them? What marketing tactics will you use?

What is your sales strategy? How do you plan to sell your product? Direct sales, distribution network, internet sales, retail, wholesale or manufacturing license. Explain why you have chosen this strategy to meet your revenue predictions. 

What is your exit strategy? How do you plan make an exit so that your investors can achieve their return on their investment. When do you plan for this to be? Will it be IPO, trade sale? What is your predicted value on exit? If you have opted for a trade sale, which companies are likely to be interested and what is the likely sale price?

What do you need to do to achieve the exit? To reach your planned exit date what needs to be done and by when, what are your milestones? 

Who is going to make this happen? Who are your key management team? What positions do they hold, what is their previous experience that is likely to be useful to ensure the business reaches its objectives? If you have roles that need to be filled say what they are and how you plan to fill them.

Investment, how much do you need? How much money do you need and when do you need it? Are you looking for anything else from the investor in terms of skills? What will the investment be used for? 

What returns are you offering the investor? What portion of equity are you selling to the investors for the level of funding that you require? Give the investor your starting point, this will invariably be negotiated and give an idea of proposed exit value and the timeframe.

Compelling Reason to Invest: Finish by stating the key points from your presentation and the compelling reason why the investors cannot afford to miss this opportunity!! This is your ‘call to action’ and needs to be a strong sales message. 

Make it Memorable!: Your pitch must be clear, stick to the allotted time and you need it to be remembered by your audience, you are one of many pitches they have and will hear, how do you stand out from the rest? Why should they invest in you and not the next business they hear?

Using PowerPoint

If you plan to use PowerPoint follow the rules from the session on Presentations; PowerPoint is a useful tool but can be over used to your disadvantage!! Remember the audience can read so don’t read out your slides, they are there to help you convey the information and present your business in a logical order. You are telling your story, make it interesting and don’t go off track or you may run out of time or lose your audience from retaining your central message. 

A template PowerPoint presentation can be found on Camtools (https://camtools.cam.ac.uk/ ) for you to access. ( to give the exact location, folder of Camtools for Lucy)


Elevator Pitch


You never know when you might meet a potential investor and must be armed at all times with your ‘Elevator Pitch’. The ‘Elevator Pitch’ is not normally used in investor presentations as there is usually more time in which to explain more about your investment proposition but in general networking forums it is a good idea to have a few compelling sentences to engage someone’s attention and make a potential investor want to know more about you and your business. To understand why it is called an ‘Elevator Pitch’ imagine you have just jumped into an elevator with a potential investor and you have a very limited opportunity to capture their attention and get them to want to know more. In this situation you have to clearly and concisely articulate your business idea without the aid of visual aids or props; so it must be well rehearsed and well delivered. You need to cover:

The Product: What it is, the need it satisfies and its USP (Unique Selling Point);
The Market: Its size and market drivers;
Sales: Pricing and product distribution;
Your Partners: High profile customers, well known partners;
How you plan to exit;
Why you are right for this opportunity and what you want;
Encourage feedback and ask for that follow up meeting.

Two examples of ‘Elevator Pitches’ follow:

Investor Pitch for Distinction Software (1997) 
My name is Tom McKaskill and I am President of Distinction Software, a software development company which provides an integrated suite of software modules for supply chain optimization for medium sized process manufacturing companies who manufacture high volume, low priced consumer packaged goods. 

Our product suite optimizes the relationship between retail demand, warehouse inventory, logistics, manufacturing capacity and raw material inventory. The package uses a sample of client data and shows a payback time on the cost of the software of less than 6 months. 
The product suite is one of only a limited number of fully completed and implemented supply chain optimization products worldwide. 

The market for such products is growing rapidly and there is keen interest from large application software providers to enter this market. These products are highly specialized, take years to develop and are expensive to complete. 

Our exit strategy is to sell the business to a global software corporation providing them with an immediate revenue opportunity within their existing customer base as well as a strong competitive advantage for future sales. We estimate an exit price of around $60 million. 

We are seeking $2 million to complete multi-lingual translation, multi-country trial implementations and documentation and training material required for a global release. 

Investor Pitch for Pioneer Computer Group (1990) 
My name is Dr. Tom McKaskill and I am the President of Pioneer Computer Group, a software development business located in Northampton, UK, with offices in London, San Diego and Auckland. The business develops, markets, implements and supports integrated enterprise wide resource planning (ERP) applications for both discrete and process manufacturers and a set of software development tools (4GL). The business currently employs 160 staff and has revenue of $15 million. 

PCG has over 200 customers for its ERP systems and over 2,000 customers for its 4GL products spread across 16 countries supported by its own staff and over 20 distributors. PCG has partly completed the world’s first 4GL, relational database ERP system for process manufacturing which has received significant interest from early customers, distributors and our major strategic partner, Digital Equipment Corporation. 

The process manufacturing ERP market is anticipated to be the next big growth market in the software applications space. PCG have just signed an agreement to install the system in 16 factories of a large UK based manufacturer, the largest manufacturing software contract signed this year in Europe. 

PCG is seeking $2 million to complete the development of the process manufacturing suite, set up trial sites in the USA and seek a strategic US buyer for the business. We estimate sales of the new product to exceed $100 million in the first two years of release in the USA giving a potential trade sale exit value of around $50 million within 2 years. 

Preparing for the Investor Meeting

Practice, practice, practice!

Practice your Elevator Pitch and your Investor Pitch. If an Investor Pitch know your audience. Is it a single investor you are presenting to or a network of business angels? If a network of angels what is the format of the presentation pitches, you will not be the only business presenting, how will they pick your? And will have an allocated time slot which can vary from 2 minutes to 20 minutes, get the timing right. How long will you have with a single investor; 20 minutes, 30 minutes? Find out before the meeting and go in prepared. Develop your pitch accordingly and practice trial questions. Try out your pitch on someone who knows nothing about your business, particularly of it is a very technical product; do they get it? If not change the pitch!! 

Go smartly but comfortably dressed. You need to feel confident and making a pitch is a nerve racking time; feeling at your ease is most important. Getting across your personality it most important; if the investor does not like you they are not likely to invest. Learn how to control your nerves. We each work differently in a stressful situation so know yourself and what works for you. Maybe it is a breathing technique or maybe like, Richard Branson you prefer a ‘fight’ with someone to give you that edge to present well.

Go to the meeting and try to be your confident (not arrogant) self, if it is a one to one meeting then greet the investors or whoever is in the room; introduce yourself and shake hands; a warm firm (not knuckle-breaking or weak!) hand shake, shows your confidence and a lot about your character. 


The Personal Brand Perception Pyramid

The triangular model indicates how OTHERS may see us, hear us and perceive us. PERCEPTIONS are as important as REALITIES – indeed more so in circumstances where we are trying to impress and “convert” others to our ideas and ways of thinking – and to put TRUST and MONEY into our ideas. The TRUST sand MONEY of OTHERS.




You may find the “Truth Triangle” rather shocking – if so – please think carefully about what it is telling us all.

20% of the judgements folks often make when we have an encounter with them relate to what we say. Rather more, 30% to “how we sound” and as much as 50% to “how we look”. Of course – these three attributes are never isolated from each other – HOW we say things must influence WHAT we say. How we LOOK relates to body language and movements – eye contact eye. Sometimes the way we stand, pose, gesticulate etc – can distract or attract from the messages we want to convey.

The “Truth Triangle” reminds us that we need to prepare carefully for EACH presentation/ encounter. Every recipient of our messages is an INDIVIDUAL – or part of a group. So, using the Triangle as a guide – let’s take the following pointers as our “preparation to present agenda”:

Always RESEARCH the people to whom you will present – find out as much as you can
If possible – find out ( asking is the best way! ) “how do you like presentations to be made?” Some people HATE PowerPoint. Some love a hard copy in their hands. Cater to the recipients’ interests and foibles.
Remember that the job is to convey what they, the listeners want to see and hear – NOT all the wonderful things you know
Choose words with care – keep it as simple as you can, and make sure you SOUND clear. Watch the audience to gauge understanding. If they look puzzled – STOP –and ask if all is clear. Pause from time to time and ASK – “any questions so far?”
PRACTICE presenting – use a mirror or a friend to gain an impression of how you LOOK as well as SOUND.
ENGAGE your audience by beginning with a question or comment you know will be of specific interest to THEM – and present your case with the listeners interests at heart and in the substance of your words. 

Presenting is not easy for ANY OF US ! It is not a naturally occurring talent in most people. It needs practice and the development of special skills. The “Truth Triangle” is a crude but constant reminder – that it is not what WE think about our presentation and how good it made US feel  - it is what is being said about us after we leave and the audience – often investors, are saying to each other about what we said, how we said it and how we looked and presented.

It is most important that you project a professional image both online and offline! We’ve already talked about the brand of your product or service but what about your own brand? As well as selling your product or service and its opportunity to the investor you are also selling yourself; so consider carefully how you wish to project yourself; what is your own brand and how will you project that through your dress, speech and manner?

You will probably be invited to sit down and, after the initial introductions, will be invited to tell about your business; sometimes the investor will start by telling you about themselves first. If you prefer to stand and present, ask if this is ok with them, and do so; remember you must feel confident and comfortable. If you prefer questions as you go then invite them; if not then ask that all questions remain until the end of your presentation. When you are ready for questions say so.

Don’t be afraid to ask questions of the investor, find out what you need to know. At the end of the meeting find out what you can expect from them. 

What is the follow on after the meeting, find out, how long will they take to make a decision? Don’t wait to be called; give them a week and pick up the phone and call them; email is not so personal and less likely to be remembered, so go on call them. 

After a week chances are they will still remember you, give it longer you may be ‘lost in the crowd’. Have they made a decision? If not do they need any more information? Are they interested? Yes – great news, what next? No – why not; can they offer any advice or suggest anyone who may be interested; it is not a closed door!

So well-presented, rehearsed and with documentation, investor pitch and elevator pitch prepared you are ready to go out and find the investors.

Approaching the Investor 



Finding the Investor

Firstly you have to find investors, this is not an easy task starting from a point of zero knowledge but Google and your business networks will help. A list of appropriate websites will be provided elsewhere in this manual.

Getting the right investor for your business is essential; they need to be right for you in the same way that your business must fit their investment criteria so do not be afraid to research them and their history. Use your networks to find your local VC’s, business angels and business angel groups. Just keep asking questions until you have built up a list of potential investors. 

The ‘Gatekeeper’

If you can find the gatekeeper, someone who can pave the way for your call to the potential investor or seek out a ‘champion’ to open the doors and make an introduction for you your job will be a whole lot easier. This person may be part of your management team, someone from a business school where you have studied, someone from an incubation centre or possibly another entrepreneur who has already found funding and can introduce you. Think creatively as a soft introduction will make your job of getting appointments a whole lot easier. But if you can’t find someone to help you then you must open the doors for yourself! 

My ‘Investment Project’

Finding investment finance is not unlike any other business project and should be managed in much the same logical way.  Build a list of VC’s, angels and angel groups that you plan to approach, with a contact name, contact details, date of contact, response, response date, next action, what documents were sent and maintain your records. Finding investment will be a lengthy, time consuming project and needs to be managed carefully; don’t get double booked! 

You will need to make a telephone call to the investor and have your elevator pitch ready. Your objective is to be invited to send in an Executive Summary. If this is managed successfully then if you have not heard from the investor within a week call them and ask if they have received your document and if they have read it. This contact all helps to get your name remembered. Your objective is to get a meeting where you will give your investment presentation. 

You may or may not require your proposed investor to sign a Non-disclosure document. The sample of the document is provided at the relevant session on the Camtools. ( to give the exact location, folder of Camtools for Lucy)

The Meeting 

If you are offered a meeting, ahead of it ask what is expected of you. How long do you have and how the meeting will be structured, prepare appropriately; if your presentation is ready and rehearsed it will not take long to adjust it to fit an allocated time. In the meeting after the usual introductions you will be invited to give your presentation after which the investor will ask you questions about anything that is not clear or where they want to know more. Asking questions, whilst not an indication of success, is a good sign. At the end of the meeting do not be afraid to ask what is the next step; don’t walk away not knowing and make sure you follow through! If you are giving more than one presentation in one day remember each has to be fresh and upbeat no matter how tired you are. 

Handling Rejection and learning to PERSIST!



You will, without doubt unless you are the next Google, going to face rejection and being told ‘no’ is bitterly disappointing, especially in the first few meetings. Tenacity is crucial for any funding project, don’t give up at the first rejection use it as a learning experience and ask, ‘why not?’ Whilst it hurts for a while, get over it quickly and take on the positive; take on board the response and if you believe the response to be valid make adjustments so that criticism cannot be leveled at you again. If you disagree put it down to the fact that that investor was just not right for the business; there needs to be a ‘meeting of minds’.

Handling Success: What Next?

Once you have an interested investor it is time to start building the relationship; find out about them and what they can bring to your business outside of the money. Make sure there is a good working, mutually supportive relationship before you sign up the deal. If they plan to put a non-exec director on your board, who is it, what skills do they bring, will they work well within your team; if the answer is ‘no’ don’t be afraid to say so, realising the problem now and finding the solution is far less painful than later in your company development. During this period you will also be refining the structure of the deal; how much investment for how much equity and in what form.

Valuation and Deal Structure



Valuation and the type of deal you are likely to be offered by a VC will have been covered in the Finance section of this manual. 

The Offer

Once the investor has made a decision to invest you will receive a document called a ‘Heads of Terms’ or ‘Term Sheet’ which is a simple document outlining the structure of the investment deal which will most likely be subject to due diligence. 

Due Diligence



Does it really work, and is what you say true? Before giving you the money the investor will want to know that what you have told them in the presentation is actually true and will start a process to check out the business. This will include technical due diligence on your product, legal due diligence on your contracts and possible personal due diligence on you and your team; do you have the capability to drive this business forward. It can be an unsettling process and is very time consuming. More information on due diligence is covered in the finance section of this manual.

Documents

A number of documents will need to be found or created; these will need to be reviewed, agreed and some signed by both parties once you have found a potential investor and your funding deal is likely to close successfully. This not a definitive list and will differ depending on the stage of finance and the location of your business, essentially the list includes:

Director’s service contracts, in a first round funding these are very likely to not exist and need to be created. Investors may also require the directors and any key staff to hold key man insurance.
Employment or service contracts for all staff. 
Consultancy agreements if the business uses any help from outside the business and sometimes the incoming VC will request a consultancy contract.
Term Sheet (a document that covers the fundamental terms and conditions of the investment),
Shareholders agreement (an existing shareholder agreement will be need to be changed to reflect the incoming investment),
Optionally an share option scheme may be set up,
The original company documents will be reviewed and may be changed (the Memorandum of Associations (Articles of Incorporation).
Certificate of Incorporation plus documents that denote any changes that have happens since incorporation, such as a name change.
Business plan, prospectus or investment memorandum.
Share certificates.
Due diligence reports.
Accountants report.
Board minutes for the transaction.

You will need to appoint a legal firm to act on your behalf and the time taken to prepare for funding should not be underestimated, gathering the information can be a lengthy process. Funding is a formal process and anything taken on trust, such as founder’s working without service contracts, will now need to be documented and formalised. 

Post investment

Assuming all goes well in the due diligence process a date will be set for the signing of the legal documentation and the transfer of funds. From that point on there are new owners of the business who will, most likely, have a say in its future. Their involvement may be day to day but if it is a ‘hands off approach’ there will be scheduled reports that you will be required to send probably on a monthly basis.

Other Useful Information

YouTube: Silicon Valley entrepreneur and venture capitalist, Guy Kawasaki, gave a speech at StartWorks, Silicon Valley in Spring 2008. This is part 1 in a 3-part series. (c) 2008 John Montgomery.

http://www.youtube.com/watch?v=1etQC2-Vg_s
http://www.youtube.com/watch?v=uFDnT_xgqJ0&feature=related
http://www.youtube.com/watch?v=UwMNlJJBVZk&feature=related

Case” Materials: Example specimens of good “Executive Summaries” and Investor Pitches can be found at Camtools Ignite. ( to give the exact location, folder of Camtools for Lucy)

Cambridge Biomagnetics
Eagle Genomics
Elondra
Probe Scientific

Approaching the Investor Check List

Assuming you have prepared your business in terms of product and management and are now ready to seek investment before starting on ‘your investment project’ ensure you have the following:

Clarity about the amount of investment you seek, what the funds will be used for and how much equity you are prepared to sell (but be prepared to negotiate).
What you seek from the investor, a NED position, consulting contract; what you want and what you may have to accept becomes another point for negotiation.
A business plan with at least 3 years of financial projections.
An executive summary that stands alone as an independent document.
A memorable and well rehearsed investment presentation.
A ‘gatekeeper’ if you can find one to open the doors for you.
A researched list of investors who invest the amount of funding you seek and invest in your market space; you must be in their investment criteria, don’t waste your time or theirs.
An ‘Investment Project’ plan; Your list of VC’s, angels and angel groups that you plan to approach, with a contact name, contact details, date of contact, response, response date, next action, what documents were sent and maintain your records.
A rehearsed telephone first contact call, not scripted but get your message across concisely and get the invitation to send in your executive summary.
A follow through telephone contact, in case you need it to get that first meeting.
A personal memorable image for the initial meeting; the greeting smile, hand shake, body language and clothing (be smart but comfortable, be you!). You will develop your own style as you become more familiar with giving presentations.
And finally, have plenty of tenacity. Unless you are very lucky you’ll need to keep ‘knocking doors’ to find that first investment but the journey and learning experience will be worth the effort you put in.
Further Information on Business Plans
Please note that the following information only applies to UK. 
A huge amount of material is available that aims to help you write a better business plan. A selection of some of the more interesting examples is listed below.  NOTE: many guidelines for business planning assume that you already have a business up and running. Consequently, some of the sections they list (current cash flows etc.) may not be appropriate for a business plan for a new venture or the development of an internal programme. 


Resource
Description
Where to find
British Venture Capital Association (BVCA)
Guidelines written by the leading network of UK venture capital firms
http://admin.bvca.co.uk/library/documents/Guide_to_private_equity.pdf
Center for Business Planning
This is a commercial site based around software products, but does also have a number of useful resources (e.g., example business plans etc.)
www.businessplans.org/
Business Link
Business Link is a free business advice and support service, available online and through local advisers. Local Business Link services are primarily funded by the Regional Development Agencies.
http://www.businesslink.gov.uk/bdotg/action/detail?type=RESOURCES&itemId=1073791579
Banks
Most major banks will be able to provide you with booklets and / or software to help write your business plan
HSBC – 

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