I get emails and LinkedIn messages weekly, from start ups and SME’s looking for investment.
I’ll be honest, the majority do not even reach me, and there’s a reason why.
You are not simply selling the business, you are showing how I can put capital into it, help grow it, and ultimately realise a significant return. Yes, no shit, I want to make money!
You’ve got about 3-4 sentences to grab my attention, and if your pitch answers these five questions convincingly, we are having a conversation.
1. What have you built?
2. Why is it valuable?
3. Why can it become much bigger?
4. What will my money do?
5. How do I ultimately get my money back - with a return?
So here are my top tips:
1. Start with the opportunity, not your history
Don't spend pages and pages explaining how the company started.
Get quickly to:
"This is what we have built, this is where we are today, and this is the opportunity that additional capital and expertise can unlock, and this would be the return"
I should be able to understand within the first few minutes:
What you do
How big you are
How profitable you are
Why you are different
Why you can grow substantially
How much you're looking for
What my return will be
2. Know your numbers in your sleep.
You should be able to answer immediately:
Revenue — current and historical
Gross margin
EBITDA
EBITDA margin
Cash generation
Working capital
Average order/customer value
Revenue by product/customer/channel
Growth rate
Recurring/repeat revenue
Capex requirements
And don't just know the headline numbers.
An EBITDA figure means nothing. Be prepared for scrutiny on your numbers.
3. Have a very clear answer to: "Why do you need me?"
This is where many owner operated businesses struggle.
Don't say:
"We need investment to grow."
Explain exactly what the money buys.
4. Make the growth story evidence-based
Don't say:
"We think we can double the business."
Demonstrate, for example:
"We currently have 100 active customers. We have identified 200 additional target customers, our sales team currently reaches approximately 20 per month, therefore within 10 months we aim to open 80% of our target customers.”
5. Explain what makes you different.
"Great product" isn't a competitive advantage.
Ask yourself:
Why can't someone else simply copy us?
It might be:
Brand
Intellectual property
Distribution
Customer base
Exclusive agreements
Regulatory approvals
Manufacturing capability
Scale
Reputation
Barriers to entry
Demonstrate this with evidence.
6. Sell the management team
Explain:
Who does what
Why each person is important
What they've achieved
What experience they bring
What gaps exist
One particularly important question is:
"Can this business grow significantly without the founder personally doing everything?"
7. Be brutally honest about the risks
Don't pretend your business is perfect.
There are three things that could prevent you achieving your goals.
Identify them, and explain what you're doing about them.
8. Show me how I make money!
This is private equity, so ultimately there needs to be an attractive return.
9. Remember that you're choosing an investor too
This is often forgotten by business owners.
Private equity isn't simply "Will they give me enough money?"
It's also about who you want to work with for the next several years.