Tag Archives: Venture Capital

Top 8 mistakes when seeking Investment

Investor reading business planAt Company Partners we talk to a lot of Investors and we often get the same observations about what Investors like and don’t like.

Although I normally try and accentuate the positives to be learned, there are valuable lessons from the goofs to be avoided, here’s my top 8 mistakes when seeking an Investor:

 

  1. You know it all, any advice about your product, strategy or sales projections is actually criticism and must be defended.
  2. The most important thing is to talk in detail about your product or service, you haven’t got figures but the market is begging for it and the sales will be enormous.
  3. There isn’t a business plan, that’s not your expertise, you just want to get in front of an Investor and they will jump at the opportunity.
  4. Mails and any communication with Investors are perfectly all right with typos and all in lower case or “text speak”, it’s your idea not your spelling they should be interested in.
  5. No work has been done to prove the concept, you’ve not the money, expertise or contacts to do so, that’s why you want an Investor.
  6. Although the business hasn’t started yet and has no revenue you want £100k for 20% of the business.
  7. Good news you’ve found a potential Investor, but his demands of equity are unrealistic, after all it’s your baby we’re talking about.
  8. You don’t have any idea how much investment you need, or what it will be used for, you just know you need someone to invest.

Let’s face it, it’s hard to know what is needed or what to avoid when you are seeking investment for the first time and we shouldn’t diminish the hard work entrepreneurs do in looking to grow their business. It helps to learn from others mistakes though.

 

How to write a business plan – getting started

How to write a Business PlanFirstly do you need a business plan? Many small businesses have never had a formal business plan.

Think of your corner store, or the self-employed tradesman that came to fix your heating, they almost certainly don’t have a written business plan. But then again they probably aren’t thinking of growing very much either.

If you do want to ensure that your business will thrive, or you want a bank loan, or investment, then you’ve got to get a business plan written out.

Why? Well it’s not until you have to think clearly enough about your business that you can succinctly write down its aims and how you are going to achieve them that you can put the actions in place to ensure it will be a success.

Usually there are two basic reasons for writing a plan; you want a plan to enable you to run your business, or to show a source of funding the information about your business that they will insist upon before putting any money into the company.

The look of the plan and what is included in it will vary on the use that you put it to. If it is mainly just for you and your staff to run the business, you’ll not need all the background and management bios that you’ll need for an Investor.

How long will it take to write a business plan? That depends on whether you have all the information to hand and how diligent you are at working on it. We’re not all gifted writers, but it doesn’t have to be a work of art, it’s more important that it covers the essentials, has a good flow and if looking for funds, NO typos. If spelling isn’t your thing, get it checked. There’s nothing more off-putting to a potential Investor than a sloppy document. Generally writing a plan can take from a few weeks to a few months.

There’s a logical process to writing a plan but when working through it if you get stuck at one point, do your best and move on. You can always come back to it later and it’s more important to keep enthusiasm and momentum going.

So now looking at the first steps. There is a bit of pre-writing planning and thinking to be done. Sit back from what you are doing and think what your personal goals are. Do you want to create a business that will provide you with a steady income, or are you pushing to become a multinational corporation? Are you readying your business for being sold, or have an invention that you want to be successful?

Then decide the businesses goals that will support you  accomplishing your personal objectives. You can start to think about what your businesses aims and ambitions are – often called “The Mission Statement”.

Considering your businesses goals, what strategies can you think of that will help you to achieve them.   For instance if one of your goals is to start-up a new business that will rapidly grow to be country wide, you’ll need strategies around product or service development, marketing and publicity and how you will price and differentiate yourself compared to competitors.

Jot all of these thoughts down in a simple bullet point or note form, for reference later when you come to actually write the business plan. It sounds obvious, but keep them organised under your own headings so you can easily find these moments of inspiration again.

You have roughly laid out your goals and strategies, that’s good, now what specifically will you need to do to make these strategies work? You don’t at this stage need a comprehensive list of actions and so you shouldn’t feel daunted by the effort of having to decide everything now.

But start noting down the things you’ll need to do to make each of your strategies work. Think also what resources you’ll need to make these work, for example; staff, funds or special expertise?

The final part of this pre-plan stage is to begin to get a feel for what other information you are likely to need to hand when writing the plan. If the business plan is for investment purposes you’ll need the history of the company, or for a start-up the background to why it is being started. Get staff or management bios ready if appropriate.

Gather your facts about the market and your competition. Make a note of where you get any market facts so that you can reference this in the plan. Think through carefully who your target market is, you will want to include a section on how you split up your market into sub-sections (called market segmentation).

Now with most of your goals, strategies and facts to hand you are ready to begin work on writing your business plan.

Next week… The business plan structure

Business Angel or Venture Capital – which to use

Venture Capital or Business AngelJust back from giving a business plan workshop to a group of MBA students, many of whom were keen to start their own business. So naturally the subject of how to fund a business came up.

One of the areas that regularly seems to cause confusion with the students is the difference between Private Equity, Business Angels and Venture Capital.

At first glance they may all look the same. But there are differences and which you use varies with situation.

Firstly let’s clear up the term Private Equity. Although it’s a generic name for having a company owned by a person or group of people where the shares are not in the public domain (ie not on the stock market). Private Equity in investment terms tends to mean those large investment companies that buy up the majority of shares in a significant sized established business.

Most entrepreneurs will be more interested in Business Angels and Venture Capital companies where they both invest in younger businesses and don’t generally take the majority of shares.

The main difference between these is that Venture Capital firms are investing money gathered from other people who have bought into a Venture Capital fund. Whereas Business Angels are investing their own money.

This is an important difference because it means that Venture Capital firms have to invest in less risky opportunities. Hardly ever do they invest in start-ups, preferring to be involved after the business has proved itself and is ready for high growth. To cover their overheads these also tend to be larger opportunities.

Since Business Angel investors are using their own money, they will be prepared to take slightly more risk, start-ups and early stage companies are more suited to these individual investors. Occasionally in order to share risk or to be involved in larger deals Business Angels will form a consortium, generally headed by a lead investor.

Business Angel Investor’s names and contacts are not in a “yellow pages” of investors, otherwise they would have people camping on their doorsteps, never mind the security issues, they tend to use intermediaries to act as gatekeepers and screens.

Some of these intermediaries are expensive to use, which is why Company Partners set itself up as a “members site”. For a small monthly membership you have access to a full database of Business Angels.