It's always useful for entrepreneurs to reflect on the key considerations that most equity investors take account of when looking at any potential investment:
- A solution to a real problem – not just as a refinement or improvement to something already available but a “game changer”;
- A unique selling point – this might be built around registered intellectual property or perhaps being the first to create a new niche in an existing market;
- A demonstrable market – not by reference to achieving some small percentage of some theoretical global market but by finding real customers who are willing to pay at the necessary price point, ideally with some early revenues;
- A management team that they can truly believe in.
If you were to delve down into the next level of detail, to try to understand what really helps persuade investors that they have found what they are looking for, you might say that it almost entirely comes down to the management team.
Some of the key attributes of a compelling management team are relatively easy to identify:
- Knowing their market and their own business inside out;
- Being fully committed to the business;
- Having the leaders in their field providing technical expertise;
- Relevant business growth experience, although not limited to successful exits or even ventures in the same field;
- Being motivated to grow a business and take it to exit.
Looking deeper however, many investors will have found that their most successful investments have been in businesses which have been led by a management team who are able to:
- Communicate their “vision”, whether to current investors, potential customers or future investors or buyers;
- Knock down doors and make sales happen;
- Utilise connections within their industry to create unique opportunities;
- Adapt and overcome major problems, whether in product development or market changes;
- Anticipate who their trade buyers might be at any future exit and nurture those commercial relationships from an early stage;
- Work tirelessly and with real ambition while making sure that their single-mindedness does not turn into blinkered thinking or arrogance;
- Operate as a united and loyal team, even if that makes some investor discussions more challenging;
- Engage with their investors, allowing them to add value where possible and ensuring they are kept informed of progress;
- Understand their own strengths and, more importantly, weaknesses;
- Deliver on their promises.
Ultimately, investors want to be excited by the possibilities of what their money could be used to create. A patent specification, a business plan or a set of forecasts is probably not going to be the thing that gets them excited. It is the way that the individuals behind the business draw all these things together and combine them with their own skills, expertise, energy and vision that is really going to convince an investor that he has found what he is looking for.