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Looking for investment? Don’t pay for this advice

Jonathan Gold

09 Sep 2015

I should qualify the above statement right away. You should take advice if you think your business or start-up needs investment. Why? Well a good number of reasons but mostly so you get the cash you need, that fits your business model, from investors you can work with.

What I mean is you need to look at what type of cash you need and what terms are best suited to the current state of your business. Can you repay a loan? Are you well established enough for a Bank to consider you or do you need an alternative lender? Do you want to part with a share in the business for an equity style investor? Venture investment, the Business Angels, venture capitalists or even equity crowdfunding costs you more long term but may be your only option if you require time to build the business revenue up, or if you are too early and risky for a loan investor.

So often when I first meet businesses seeking investment - loan or equity - they have not looked at the cash needs of their idea or company as a strategic issue. It is a big issue and contacting an external advisor who understands not only finance but the types and requirements of investors is a wise move. Also, you and your team maybe too close to the business and will almost certainly benefit from a fresh outside perspective.

Then why am I saying don't pay for the advice? It's important to remember a prospective investor or VC is not independent, their primary interest is themselves or the investment clients/fund they represent. We want you to succeed but until we invest and even afterwards, we have to act in the best interests of our Fund.

For this reason actually you should pay for the strategic advice, for help and assistance in developing your business. You do get what you pay for, a cliché but true. Choose your advisor well, ask them about their track record, and shop around.

Also please do ensure you take proper professional tax advice, especially when starting up. You can't go back and fix certain problems you may have accidently put in place at the outset.

So why did I say in the title don't pay for advice? Well the strategic advice, tax advice on your business you should definitely pay for, it has great value. The general stuff about working or pitching to investors is or should be free. So here are a few points from me, is you want to raise cash, gratis and for free:

Know the finances in the business and have a "Fund raising" strategy
Start raising money well before you need it. Raising more than £100,000 in equity finance can take months
Research your investors and find ones that make similar investments. It's easy these days as we all have websites
Sell me the business, not the product: we invest in the business, not the product
Cover how the business works. Too many presentations and business plans don't concentrate on the business model
Test your plan and presentation on others before I see it. Try it on your mother, if she doesn't understand it then I might not
Keep it simple and short. The plan needs the detail but 20 pages is normally enough plus an appendix with the spreadsheets and CVs
Don't try and impress with complicated English, be clear and concise
Explain any assumptions you make in the plan: don't leave me to guess any important details
Prove you have sales or where they will come from and when if you don't
Demonstrate you know your finances: how cash comes in and out.