This article from Oxford Foundry Start-Up School will help you figure out when it’s time to look for funding.
Investment-readiness covers a broad range of areas of your business to consider in preparing to access equity investment. The core elements that you need to feel you have covered before going out to meet investors include the following:
You and your team:
Can you and your fellow founders demonstrate experience or skills in the sector or area that your business is addressing? or are you looking to use the investment to fill gaps
How far have you proved the viability of your business idea
Do you have a working product or a demonstrator?
Have you tested out the business model with your target potential customers-
Do you have users or followers
Have you tested out whether users/customers want it/need it, or prepared to pay a price for it?
Have you developed this business to address a need or problem or gap in the market?
Are you clear on the size of this gap/need ? and what part of the target market you could reach?
Do you know who are your competitors and have a clear idea of how you compare and how your business positively differentiates from them?
Competitive position- IP
Have you identified your core intellectual property .
What steps do you need to take to protect your IP? This could be part of your investment request.
Do you have first mover advantage?
Can you demonstrate /provide evidence of how far your product/service is new and innovative ?
Or can you show it is capable of disrupting the market/sector
Is it scaleable?
Can you identify how you could scale your business – this could be by market or geography or by acquisition?
Finance and Investment
Have you developed an initial budget and forecasts of 2-5 years when you foresee you will have sales/revenue and when you might break even- is it realistic and show how you will grow ?
Can you clearly identify how much investment you need now and over the next year to 18 months
Do you know what you will spend the equity investment on to establish and grow the business
How much equity are you prepared to give away to your investors in the early stage? – and can you justify how you have valued your business and what return you think you can offer over time?
Have you identified how you will exit and have you looked at other comparable scenarios in your sector/area in terms of acquisitions or IPOs – are these realistic scenarios? Bearing in mind these are merely indicators at this stage.
Finally Have you got your Investment ready toolkit ready?
- A one minute pitch- elevator
- A 7-10 minute pitch with a powerpoint deck including all of the above
- An executive summary
- An investment proposal – this is your business plan set out so that an investor can easily identify the investment opportunity
Of the above core elements:
Great Team – Can you show that you have the core skills, understanding and commitment to build a business to exit?
Capacity to Scale – Can you demonstrate that your business model can be scaled and that you can bring investors 10x return
Value Proposition – Can you demonstrate that your business model can be scaled and that you can bring investors 10x return