Entrepreneurs

Preparing for investment

Hints & Tips

 
 

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While not intended to be exhaustive or prescriptive the following points may assist you as you prepare your business for investment readiness:

  1. Valuation. Notoriously difficult to evaluate particularly as the normal metrics of mature company valuation cannot be applied to pre-revenue or early stage businesses. Be reasonable, do not base valuation on multiples of revenue several years ahead: many businesses don’t get that far, yours might be among them.

  2. If all goes well Investors will want to undertake Due Diligence, a detailed examination of your business so it would be helpful at an early stage in the process to have ready Company formation docs, e.g Memorandum & Articles of Association and an “angel-friendly” Shareholders’ Agreement, which gives investors pre-emption rights and helps prevent their stake being diluted by future funding rounds. Your accountant should be able to help here, otherwise contact us.

  3. Pre-approval from HMRC for SEIS or EIS is an essential pre-requisite for most investors, as the schemes confer significant tax advantages. Not all business sectors are eligible for the scheme (including financial services and property-related schemes) please visit the HMRC website for more information https://www.gov.uk/guidance/seed-enterprise-investment-scheme-background

 
 
 

Your business is likely to attract investor interest if it can demonstrate some or all of the following features (in no particular order):

  • Robust & defensible Intellectual Property.

  • Scalable, replicable business model, i.e. not a lifestyle business or over-dependent on one individual. (Nothing wrong with lifestyle businesses, but they don’t attract investment).

  • Current Investor preferences exclude most B2C and FMCG propositions, if yours is in this category you may wish to widen your search elsewhere, as we will be unlikely to help you.

  • An experienced Management Team, preferably with a proven record of success in earlier ventures.

  • Clear and understandable Business Plan demonstrating knowledge of market, routes to market, and the business model.

  • Clear exit strategy.

  • A mention of any skills gaps that an Angel Investor could help with.