Finding your perfect (funding) partner
What do you do? What are your prospects? Where do you see yourself in five years’ time?
Common enough questions if you’re sitting across from a potential suitor on Channel 4’s First Dates but also questions you need to be prepared to answer if you find yourself opposite a potential investor trying to raise investment and convince them that you are ‘the one’, writes James Thomas, partner and head of the tech team, HMT.
Be under no illusion, there is an awful lot of funding available to those who have done their homework and are well prepared for any fundraising exercise.
Beware however that much like a blind date, fundraising is a competitive, cut-throat process. Your start-up Edtech business is vying with that later-stage Fintech company and that sexier AI business that is also flirting for the investor’s attention and ultimately their credit card.
If the dating analogy has been laboured then unashamedly so. Packaging your investment proposition well, researching the investor market to make sure that you have the same ambitions and right chemistry as well as timing your run will maximise your chances of establishing a longer lasting relationship. Unless you put in the effort, more people will turn you down than will succumb to your charms.
Doing your homework
Preparation is key and business planning should be seen as more than just that end-of-year budgeting process that you suffer on a routine basis. Forward thinking companies look further ahead to determine longer-term strategic ambitions and the resources required to get there.
Having a credible growth plan (based on defensible assumptions), key intellectual property or differentiation in an attractive growing market coupled with in-depth knowledge of the competitive landscape are all key ingredients for success.
Timing your run
It is often said that fundraising is a race against insolvency. Successful companies recognise that fundraising is not a quick process, often taking up to six months (or more) to complete so they plan in advance of any cash squeeze or deadline for any investment decision.
2018 was another strong year for investments which, according to analysis from Beauhurst, saw over £7 billion invested on the back of a record 2017 when over £8b was invested.
Areas of interest
Fintech, Blockchain and AI companies all continue to be particularly popular areas of interest but in a world of SaaS business models allowing nimble companies to onboard customers more quickly and underpin revenue predictability, sector is no barrier to securing investment. Appetite for IOT, cyber security and data analytics businesses among others remains strong but evidence of commercial traction is a must for the professional investment community whatever the technology.
Who’s who…
There are hundreds of different investor groups all looking for good quality deal flow, from venture capital, private equity and private family offices through to specialist venture debt and regional funds.
These funds may however be focused on different sectors, technologies, geographies, funding levels and stage and as such, especially if you don’t know where to start, fundraising is a full-time role.
The tech team at HMT has been working with ambitious fast-growing tech businesses over the past 20 years to support their fundraising and help avoid the bear traps. Whether it is an exploratory conversation to understand the range of financing options available to you or to discuss supporting you on a current or forthcoming fundraise, HMT will help prepare you and your management team for the process and connect you with the most appropriate funders for your business allowing you to focus on running the business.
PS Investors are there to make money and will want to know your exit route, and by that we don’t mean the toilet window while waiting for the cheeseboard.
