18 Nov

What does it takes to get an investor?

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The Caban Group of Companies is a collective of entrepreneurs helping other entrepreneurs by providing essential services on credit and raising capital. For us to achieve this goal, we ourselves constantly raise capital for Caban locally and abroad. With over 90 year’s collective experience in raising capital and having successfully capitalised 100s of companies, we want to share our experiences on what it takes to raise capital. There is a misconception that there is a lack of capital in the eco-system. We wholeheartedly disagree: if you follow some key traits and activities, you will find the capital for your business.

 

We have broken our advice down into two sections:

 

1. Preparation prior to pitching

 

Get friends and family behind the project

 

Investors, most of the time, want to see that your family and friends have invested in your dream, however small that investment might be. The investment does not always have to be in cash but can also be in sweat capital. Just knowing that family is involved in some way and that an entrepreneur has their support goes a long way in assisting an investor in formulating an opinion about the project. It is of critical importance that your life partner is completely behind you. If your life partner is not behind your project, you have two options:

 

  • Change your life partner;
  • Do not proceed with the project.

 

I know it sounds brutal but don't even try to get going if your life partner is not fully behind you.

 

Business plan and related documents

 

We never get involved in a business unless there is a plan. We have written about the subject many times. Business planning is critical for the success of the company and for an investor it clearly sets out the objectives, the "how to” achieve the objectives and the ultimate reward. These plans should include exit strategies so that investors have a clear understanding on how they will eventually cash in the investment. 

 

Your business plan must clearly demonstrate that there is a market for your concept. The best way to demonstrate this is to do field surveys. These field surveys must be large enough to satisfy a potential investor that there is a market for your goods or service.

 

Supporting documentation is crucial. If you make a statement back it up with proof. Never make broad statements, this does not impress. State your sources so that it can be verified and if you are not sure of a statement leave it out.

 

Your presentation document must be excellent. Your key documents are as follow:

  • Executive summary;
  • Full business plan;
  • Historical figures if available;
  • Five year projections which include balance sheets, income statements and cash flows. Solid assumptions must accompany your projections;
  • A PowerPoint presentation.

 

If your documents are good, it creates the right impression.

 

The right team

 

We often get commended about the Caban executive team. The remarks stem from the fact that we all share the same vision and determination. Most start ups, by their very nature, do not have a complete team. That is why it is imperative that you have the right corporate advisor at your side. The advisor will give you the credentials that your team might lack. Most of our start ups are "one man business". When presenting, it does not inspire investor confidence in investing in one person. By aligning themselves with the right corporate advisors, they can state that they have financial, marketing, legal expertise as part of their team members. This reduces the perceived risk for investors.

 

Corporate advisers and mentors

 

Being an entrepreneur is a lonely road. You should have advisers that are prepared to go on risk with you that will assist in the process of raising capital. Choose mentors and advisers that understand the game and have a team behind them that can assist in the many challenges entrepreneurs face. Once you have the funds, investors want to see that you have the right advisers to follow through with your business plan. It gives investors comfort if your adviser gives an undertaking to them that they would get regular updates on the company, besides the normal corporate governance routine. 

 

Do not overvalue your business

 

Every entrepreneur thinks that their project is worth much more than it really is. That is natural and to be expected – we normally half the profits and double the capital requirement of anything that gets presented to us. As a rule of thumb, take your first three years of after tax profits projections, add them and that would be a good indicator of the value of the project. If you are completely unrealistic with your valuation investors will just walk away. Get proper advice. 

 

Make sure you have a digital presence

 

One of the first things investor do after a pitch is to do a Google search on the entrepreneur and the company or concept. If you do not have a digital presence, forget it. Get that sorted first. 

 

Network

 

There are many networking sessions in the eco-system. Go to them, be seen, interact and get known. There are always investors that attend these sessions and often they do not disclose that they are investors. Go to pitching sessions: the more exposure, the better the chances.

 

2.Pitching advice

 

Passion, Passion, Passion!

 

An investor, more often than not, will invest in an individual that is passionate about their concept. We have seen 100s of presentations and you always remember the ones that made an impact in their presentations. One can tell whether an entrepreneur is uncertain or completely convinced that their product or concept will make a difference. 

 

Confident not arrogant

 

There is a huge difference between the two. We, as a rule, do not invest in arrogant entrepreneurs. Normally, arrogance breeds a culture of not wanting to take advice. Entrepreneurs that think they know it all are doomed. Be confident in your presentations but never arrogant.

 

Perseverance

 

Do not get despondent! Raising capital is not easy and you will have to try, try and try again. You might have to refine your pitch or change a few things but keep at it.

 

Make eye contact and look good

 

When you are negotiating make eye contact. It sounds simple but you will be surprised at the number of people that do not. 

 

Investors also want to see that you display an element of respect. Do not go dressed in shorts and slops if you want somebody to invest. You do not have to go in you Sunday's best either. Just show that you respect the individual you are pitching to.

 

Have all the answers when you pitch to investors

 

Know the figures, market, competitors and barriers of entry well. All it takes is not to be able to answer a simple question to throw away your chances of getting an investor. If someone has assisted you with the documents, study them well. Know everything backwards. 

 

Conclusion

 

After years of experience, if you follow the above, you will succeed. But remember, there must be a business case. 

 

The key to success is Passion, Perseverance and Patience. The greatest of these three is Passion.

 

We recently launched our own portal to assist in the process of finding an investor. Go to www.tblinvestorsnetwork.co.za for some further free advice.

 

Happy Hunting!

 

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