Everything you need to know when preparing for investment
Posted: Fri 12th Aug 2022
Getting ready for investment can feel like a full-time job when you also have to run a brand. Here are some of our best steps to help prepare you and guide you through it.
Catherine is a finance expert and Enterprise Nation adviser. Be sure to connect with her today!
You have big plans and need an injection of cash to do everything you want and more. This is great but make sure you’re planning ahead, as timing is critical.
Generally, you’ll need to factor in the time it takes to approach investors and then the time to complete the transaction. It can take up to nine months before any cash is actually transferred.
Whilst you’re fundraising and in front of numerous investors, make sure you’re hitting the milestones you’ve outlined in your financials and deck, as it’ll make it that much easier for them to agree to fund you.
What are you good at and what are you not so good at?
No brand has it all together (even if it looks like they do) so be honest with yourself about your strengths and weaknesses.
You might have an amazing team and great social media platforms, but perhaps you struggle with your supply chain or need better margins. Being transparent with investors on how you’re actually going to solve this is super important. You don’t need to have it all figured out, but you need to be aware of what your brand needs to improve.
Is it a match?
It’s key that you understand who you’re actually pitching to and start with the investors who actually invest in companies like yours and at your stage.
Network with other founders who have already raised capital in your area and utilise databases such as AngelList, Crunchbase, and NFX Signal, which are great resources to see who invested in which companies, at what stage and what they look for.
For long-term growth, you‘ll want to raise from investors whose values match yours and from those who can bring additional things to the table such as beauty and wellness industry knowledge or operational expertise.
You also need to make sure their terms work for you and understand what the working relationship will be like. If they’re highly involved investors, be sure that you actually want them there for the long haul.
Get those Is dotted and Ts crossed
You’ll want your financials and legals in order before venturing further into discussions with investors.
Depending upon which stage you're at in building your business, you’ll either have great historical data to work from or it’ll be more assumptive. The model is meant to show how your business does over the next three years if the investment is secured.
Be prepared to tell the same story the numbers do. Also, have your balance sheet, P&Ls and cash flow at the ready along with any other legals required for the specific country you’re operating from.
Be clear on how you’ll allocate the money
First things first, get really clear on how much you need (your financial model will help you do this) and how you’re going to allocate the money and which time period.
Will inventory and D2C expansion be responsible for the growth story you’re telling? Or is moving into new markets and NPD where you need to put most of your capital right now?
Investors will want to see that you have at least two years' working capital forecasted. Showing what impact the money will actually have and where it will be allocated is key.
Be prepared for a lot of 'not right nows’
Fundraising can be a tiring business and full of many answers resembling: ‘we want to watch what you’re doing with XYZ over the next few months'; or 'if you hit this milestone, we would be keen.'
Remember that your enthusiasm, willingness to adapt, solve problems and prove that you have a great brand that can scale is key. If the investor says ‘not right now’ then don’t give up, ask them for feedback on why and make sure to keep them up to date with the milestones you’ve reached.