If you’re looking for equity investment, the investor’s requirements are equally important as your own. Yes you need money, and yes you may have a good idea that you think will change the way the world works but is that going to give the investor what he really wants?
The end-goal for an investor is simple and works in a similar way to the stock market. They bought equity (shares) in your business when the business was worth, say £5M. The aim for the investor is to sell the equity in your business at a future date when the company has increased in value. If the value of the business has doubled, so has the value of the money they originally invested.
If an investor backs your business and pours in their own money, it is an ‘investment’ for them – they are looking for a return on the money they have invested. Investors, like entrepreneurs, want to make money. In the case of equity investment, an investor can only make money when they sell their share of the business!
For this reason, investors look to back businesses that they feel are well placed to make money and grow in value.
So what will attract equity investors to your business? How do they pick out growth businesses? They will definitely want to see that you have a good product, there are significant barriers to entry for competition, a good market, a scalable business model, good business plan (with financials), a highly skilled team and often IP (Intellectual Property).