When it comes to raising money, you could be forgiven for thinking “the pitch” will be the main determinant as to whether you are successful or not. While the pitch should be a distillation of the business and the parameters of your deal – and is therefore very important – it really only represents less than 5% of the overall conversation and process a successful capital raising follows.
A successful capital raising starts long before you begin putting the slide show together. Like any meaningful campaign, successfully raising money from investors is a process that should span, generally speaking, between three and nine months.
If you’re an early stage business, or even a seed stage business, becoming investor-ready is a process of proving up your concept, minimising the risk, and maximising the future growth potential.
Raising money from investors is a bi-product of building a great company. Indeed, many of the capital raisings I have done for my own businesses and acquisitions over the years, were never accompanied by a pitch deck. They were the result of building a strong business, or if its very early in the piece building a robust strategy, and then having meaningful conversations with smart investors.
As investors we want to see proof of concept, consumer insight and understanding, a well articulated problem, a proposed solution (even if it’s understood the solution will be iterated upon in the coming years), a strong growth strategy, a healthy valuation methodology, an appetite for direction and input from advisors, and most of all we want to see a great human being at the forefront, having an honest conversation. Does the founder running the show have the nouce to go through all stages of growth, and if they have built a team, are they up to task? If you’re a founder, you need to prove to potential investors you and your team’s ethics, values, capabilities, resilience, ability to execute, and how these attributes are going to translate into results.
Like in any field of business, raising money is a skill. It can be learnt and it can be done well. However in order to do it well you need to be looking at, and working on, what matters. The pitch should be important in that it highlights the work and preparation that has occurred, but if all that has gone into the pitch is a well put together slide show, then your deal may lack the substance to bring in the dollars. Investor due diligence takes anywhere from a month to 12 months and beyond, at which point the pitch presentation becomes a distant memory as they dive deeper into your business.
Many Australian small business owners list access to capital as being their number one barrier to growth. While capital is critical to the growth of any business, raising money from investors is still one of the most misunderstood skill-sets across the Australian landscape.
With the developing Australian ecosystem and an increasing number of channels to investors, the Australian environment is more fertile than ever for those who understand how to become investor-ready and run an effective capital raising process.
The money is out there. A total of $2.6 billion in venture money is currently available in Australia. In the last five years, venture capital funds have invested over $650m into startups based in Australia, typically between $200,000 and $20m per raising. With increased tax incentives for investors from the innovation statement, there is even more interest from investors to invest in early and growth stage companies but the number one barrier to investors investing is that the companies are unprepared.
If you are looking to raise capital to fund growth in your business, The Entourage offers a four month intensive Scale Program to help you to build significant value in your business, learn the process of capital raising and prepare your business for expansion. Click here to register your interest.