When it comes to securing funding, any small business owner or entrepreneur will no doubt be worried by the uncertainty posed by Brexit. However, the difficulty of securing investment for small to medium enterprises is by no means a new problem. Limited access to credit became a more serious and widespread issue following the 2007 crash, though the decision to leave the EU has only served to cast further doubt on the overall investment climate.
Whilst investment funds and banks may be more reluctant to lend during this period of uncertainty, the situation is not all doom and gloom. We have recently seen angel investment – funded by private individuals – emerge as a popular and important third option away from the major financiers. An estimated £1.5 billion is invested annually by angel investors into start-up businesses, making this a critical line of credit.
Getting inside the head of an angel investor and understanding their motivations is critical if you are to succeed in persuading an individual to invest not only their money, but also their time and expertise. As an investor with 20 years’ experience of funding British business, I’m often asked for my top tips for people pitching to private investors. Here are my top three:
Be clear about what you want
It’s essential that you set out exactly what you want and expect from an investor – honesty from the very beginning of the process will save any misunderstanding or break down in relationship further down the line. Whether you are looking for an investor to help by bringing a wealth of business expertise and a large industry contact book, or if you are merely after additional finance, set this out straight away.
Present a long-term plan
While it is important to provide a viable exit strategy for an angel investor, don’t let this dominate your proposal. Of course investors need to see where they will be able to realise a return on their investment, but they also want to see that you have a strong vision on where the investment could take the business. Show them that you’re in it for the long haul by presenting a 5-10 year plan and highlighting precisely the role you want your angel to play as part of that, whether large or small. Angels want to know that you are looking for a partner, not for someone to sell your business to.
Illustrate the market opportunity
You’ll need to be able to demonstrate to the investor the growth potential of your business by outlining the problem you are solving, and the subsequent market opportunity. By setting out realistic targets and ambitions, backed up by real market insight and knowledge, an investor is far more likely to embrace and buy into a project. The more proof points and evidence of early success you can demonstrate, the more confidence the investor will have in making the business work on a larger and more long-term scale.
Ultimately, finding an angel is about more than just securing finance – the right fit can lead to a successful, long-term business partnership. So in these uncertain times, perhaps it’s time for you to consider angel investment as a strategy for growth.
Javad Marandi is a British investor, entrepreneur and philanthropist. Over the past 20 years he has developed portfolio of successful investments across a number of sectors around the world. These range from hospitality and retail, to commercial and residential property, construction and fashion.