A Day With Midven’s Investment Director, Gio.
Giovanni Finocchio is an Investment Director on the MEIF West Midlands Equity Fund at...read more
Midven explores how SMEs effectively communicate high growth potential to attract investors and take their businesses to the next level.
With more than 780,000 businesses across the Midlands, the region forms over one eighth of the UK economy. Amongst them, a burgeoning growth of SMEs that have the potential to grow exponentially with the help of investors.
Launched in 2018, the Midlands Engine Investment Fund (MEIF) invested more than £50million into over 150 firms by the first half of 2019. The question we look to answer in this blog is how these businesses positioned themselves as attractive investment opportunities, securing the attention of investors across the West Midlands.
With Midven providing equity finance to diverse businesses located in all six of the West Midlands LEP regions, we receive a steady stream of business plans. The businesses that successfully receive investment tend to excel in three key aspects.
The business plan is a key document for investors and it is often the first representation of how attractive a business is to invest in. A strong business plan is not only succinct, it is well structured
. Effective business plans cover the important points with the segments below:
If you are learning how to build a business plan from scratch, get a more comprehensive start with Midven’s business plan advice.
While optimistic, the financial forecast should be sensible. Investors are adept in identifying unreliable forecasts and in this instance, brevity and vagueness will be detrimental to your cause.
As you outline your forecasts, it is important to have a very frank look at your cost and revenue streams. How did you arrive at your figures? Make sure to clearly set out your assumptions. Have you accounted for all the costs including the cost of customer acquisition?
Take the time to perform a sensitivity analysis to illustrate how your forecasts are affected by different variables. For example, what would your forecast look like with half the amount of investment that you were looking for? What does it look like without investment at all? Will the business survive with lower than anticipated growth/traction?
A robust forecast should also consider any future funding requirement. Being transparent in this instance is actually a good thing as realistic investors are prepared to work with others in order to help a company grow.
Venture capital companies like Midven receive a consistent stream of business plans every day and the team of analysts commit to performing appropriate due diligence. Plans that make investors pay attention, often share the following aspects:
While being enthusiastic about the product is imperative, it is important to consider writing for the intended audience. Sending a 73 page, jargon laden description of a product or technology is not the most effective way to get analysts to sit up and listen. Keep descriptions snappy and minimise the technical lingo. After all, hearing information straight from the horse’s mouth will always be preferable and if the pitch deck is good you will most likely get the chance to explain your idea face to face. Make sure you always answer the question ‘What market am I addressing’
Being realistic with aspirations goes a long way. This also allows businesses to be more specific with their goals and develop the appropriate pathways to achieving them. For example, a global market size is not a realistic immediate aspiration for an SME. Casting a more precise target demonstrates that the business has given careful consideration to the market that they are addressing.
Another good example lies in exit aspirations. While many SMEs hope to receive the golden ticket in being bought by a conglomerate for millions of pounds, it does not happen all the time. A realistic exit strategy is attractive to investors because it showcases that a business acknowledges that they have clear goals for when they would like to exit, and for how much.
The strength of a business is often in their people. Here at Midven we tend to invest in people as much as we do in the ideas. After all, an investment is a working relationship that lasts at least a few years. Providing investors with a succinct description of key team members and the relevenace of what they bring to the business is helpful in decision making and in the long run, imperative for strong relationships.
With all the important facts articulated in a concise and organised business plan, some simple but important key points are commonly overlooked. Before submission, it is important to ensure that you review your business plan for typos to make a positive impression.
Remember to include the location of your business as investors tend to have a regional focus. Knowing where a business is located helps avoid wasted effort and time from both parties. Most importantly, remember to include your contact details, investors need to know who to get in touch with!
We understand that whether you have just set up your Company or are only just beginning your investment journey there are a lot of things to focus on. We can help. Midven will be running a free two-day Investment Readiness Workshop in April 2020 at the NatWest Entrepreneur Accelerator, Brindley Place, Birmingham. The workshop will be providing the finer details on how you can prepare for your pitch. It will discuss:
We will also give you the opportunity to give a short pitch at the end of day 2, accompanied by detailed constructive feedback from ourselves.