Sonia Chiu
Innovative Startups
KPMG

How to get investor ready

Before initiating the investment process, consider the following:

  • Have you got a compelling equity story with supporting evidence? Coupled with this, how are you communicating the story and is it consistent. Your numbers and financial model need to mirror your business plan. If your business plan says you are expanding into Brazil and China, make sure your numbers reflect that as well.
  • How do you measure against your peers? Make sure you have sized up the competition in the product and market space and that your valuation reflects your place in the market.

You will have a lot of due diligence performed over you. Make sure you are ready for this.

The main take home points around this would be:

  • Have a suitable legal structure in place which illustrates EXACTLY who owns the company. Companies sometimes trip up due to complicated equity and legal structures; define yours from the start and make sure it measures up.
  • Make sure you have secured your IP. This is what your company is valued on and makes you unique so make sure the IP is legally owed by yourself and secure from a direct copy.
  • Think about the due diligence process before it happens and pre-empt the issues that may arise. Are there any complicated leases, pensions, claims / disputes, customer contracts etc.
  • Tax underpins so many areas; make sure you understand your tax structure and how it supports future business strategy.

One of the key areas of scrutiny is around the management team and having appropriate levels of governance in place.

Some of the things you should think about, and will be analysed during the investor process are:

  • The key question is, do you have the right skill set at the Board level. Do you need to recruit anyone into key positions; even temporarily? For example, a Financial Director (FD) is someone who is able to run the business from the financial point of view, prepare and aggregate financial information to directors and talk through the financial projections and scope. It takes a very different skill set to then dictate how the company will run through the investment process. A lot of information will be demanded and a lot of information is required. Is your FD ready for this?
  • With regards to the above, are you ready for the additional scrutiny from a new set of stakeholders? You will have additional reviews of management information; choose your investor well and you will be spending a lot of time with that individual.
  • Have you thought about corporate social responsibility? This is key in all companies now and requires thought and time to get a charity or responsibility that feels right for your company.

In line with the additional scrutiny from above, if you are going for investment you need to be able to produce quality financial and KPI information on a timely basis.

In order to do this, you should think about the below facts:

  • Do you have systems which produce quick and reliable financials and KPIs for the Board?
  • Is there clear and timely communication with key stakeholders? Are the matters that count discussed early on and in a prompt manner? Are they discussed between a couple of key individuals or is a board meeting called, and documented?

How robust is the budgeting and forecasting process? Making sure you can budget and forecast, and compare to actual numbers is vital in your business.

These budgets and forecasts should be based on reasonable, and more importantly, justifiable assumptions.

Overall, investor readiness is key and there are practical considerations highlighted above to think about, before you even consider accepting and on-boarding an investor.

Resources

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