A recent study carried out by workspace provider Plexa analysed UK funding rounds between 23 March and 19 August 2020. They looked at nearly 30,000 UK start-ups and fast-growth businesses and reported a 30% decrease in deal numbers for seed-stage companies compared to the same period in 2019. On a slightly brighter note, £219M was invested in start-up companies who had never received funding before but is was nevertheless a reduction of 18% compared to 2019.
Plexa says that due to the drop in the number of deals “start-ups could struggle to raise funding as a result of ‘economic disruption’”. According to research by virginstartup.com, lockdown gave potential founders the time and space they needed to develop their business ideas. Virgin StartUp asked founders for their thoughts on COVID-19, the impact of lockdown on their business decisions and why they set up a business. 51% of lockdown entrepreneurs agreed that they'd never thought about becoming an entrepreneur before lockdown and 69% of lockdown entrepreneurs agreed that lockdown gave them the push they needed to start a business.
So, this is a buyer’s market now more than ever and you need to be properly prepared for your funding/seed round when approaching investors. Yes, they will look for the obvious like a credible management team, but three key documents that you need to provide are:
Now more than ever you need to stand out in what is an increasingly crowded marketplace. You need to spend time focusing and planning your campaign. Remember, there is lots of help and guidance available online, and don’t forget practice makes perfect when it comes to presenting your pitch deck to investors.
The principal document for any investor that they will expect you to have produced is the term sheet. The good news is that a professional and investor-ready term sheet is produced by the FounderCatalyst platform (free of charge), once you have entered some basic information. Don’t forget that your relationship with an investor is a bit like a marriage - the term sheet represents the interests of both parties and what you are proposing. Key metrics, such as the valuation of the company (be realistic), the level of investment required and the level of investor control, amongst others, are captured in this document. Yes, it may be non-binding, but it is an important document, and it can be awkward to discuss changes later on. You need to get it right and you only have one chance to grab their interest. Fortunately, the FounderCatalyst term sheet covers all these points, and more.
You must produce a business plan which includes detailed projections and specifics about your target market. It must be able to hold up to scrutiny and not fall apart at the first hurdle. Share your business plan with people you trust and who have run successful businesses, or whose opinion you value, and get their feedback. Put yourselves in any potential investor’s shoes – what would they want to see in your plan and what makes your company different and stand out against all the other start-ups who approach them for their hard earned cash? There are many templates for business plans online, plus useful tips.
The last key document you need to provide is the pitch deck. Your pitch desk should be short (10 slides, no more than 15) and to the point. Clarity is the key word here. You need to articulate the problem that your product or service solves, describe the market, how you are going to execute and what you are going to use the investors’ money for. There are many great examples of pitch decks online. Research thoroughly and identify which template and approach works best for you. Share it with any trusted investors you know, or again with people whose opinion you value. Remember, every meeting/pitch with an investor is a review – get their feedback and improve your deck.
You can upload your business plan, pitch deck and other key documents to your FounderCatalyst Intelligent Data Room. From there, you can actively manage your investor engagement. You can invite potential investors to view your key documents and see when they have done so. Before investors view anything, as part of the process they must sign a non-disclosure agreement, protecting your idea and your company. All of this is provided free or charge; just register by clicking here.
By having a professional term sheet and actively managing your investor engagement, you will appear organised and have already started to stand out from the crowd.
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