InvestingMentoring

A Founders Guide on Seeking Investment

 

This brief guide should help founders understand the process and timescale investors follow when considering investment in a company. Timescales and details change with each investment and so this should be consider a rough guide only.

 

First, as a founder, make initial contact with your 1 – 2 paragraph elevator pitch. This has to contain what you are doing, why it is unique, why you are able to do it. What investment you are seeking in return for what equity in your company and last but not least, what is the investors expected return on investment (ROI) and likely timescale.

If successful, next comes the infamous pitch deck (a brief business plan). It should be around 5 to 7 pages (PDF or Presentation) that describes your business in more detail. There are many examples of pitch decks out there, or you can use my Business Plan Advice to help build it.

If the investor likes the pitch deck, they will offer to meet. That meeting will typically last a couple of hours and at the end the investor will give you advice or feedback.

If the investor is interested in investing in your business, they will issue a term sheet which they will ask you to sign. A term sheet is a basic framework which lays out the investors intentions, what they are offering and what they are asking for in return. You should negotiate any terms at this point, if relevant.

If you sign the term sheet, due diligence will start. This is normally a fews weeks process which seeks to verify all the information about you and your company.

If there are no discrepancies found, then a formal investment contract is offered. At this stage it is wise, but not essential, for you to seek legal advice.

Once the contracts are signed, the shares are transferred, directorships made, shareholders agreements signed and monies transferred.

As for me, as an investor, I don’t seek a board position, but I do take a minimum of 25% shareholding in your company. I will happily give informal advice for the first 6 – 12 months. After that, I generally find founders are more than capable of running their business without my help. I am unique in that I don’t seek to exit. I only invest in companies where founders are looking at building a long term business. Founders that wish to build a business and sell out after 5 – 10 years are of no interest to me.

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