The external financing of the company is one of the most delicate and most powerful issues than startup¸ SMEs and large companies are directed every day. In a context in which banking, historical figure of relevance to undertake external capital tickets, seems to have lost whole in terms of trust ( edelman , 2016)*, it is interesting to put the point of sights in individuals who join business projects or companies settled to maximize their investments.
It is common to associate the term round or pool of investors only to the current startup or multinationals with large buildings in Manhattan, but the truth is that it does not have to be So atypical for an SME. Finding external partners who contribute capital and/or knowledge can be the best formula to enhance the growth of a small or medium business. Today we break up certain aspects that surround a call from investors¸ in case you are thinking of hanging.
We have stayed that we move away from the auras of new creation or multinational to give realism and daily life to this matter. Let’s put, then, that in your case, you are a family SME that invoices € 300,000 a year. You dedicate yourself to ——– and it turns out that you have detected that you need to expand your national coverage, that is, facilities, personal, logistics … and of course, you need resources. What differences are there between going to the bank or calling an investment round?
differences between banking and capital investors
As we said, the most common option has been to go to the bank and request a credit of a considerable amount, assume a certain link with the requested amount – in some cases, personnel -, provide the specific guarantees, set the payment deadlines and interests, among other characteristics that depend on the case in terms of details. In any case, this first option guarantees the absolute control of operations and benefits – if all of the above is not complicated – of your company, but in addition, the aforementioned risks and debts contracted. Betting on a loan also implies that knowledge and management will be exclusively in your figure, therefore, it is undoubtedly the best option if you really think that in your particular case you do not need any management support.
Case apart is related to the entry of external investors in your SME, since in this case, it is not a loan, but about a participation of your company, therefore, you will add to your project a person who will want to know And see what direction its capital is going. Thus, Cedes – in the measure of the agreed percentage – control, but also share risks and benefits proportionally to the percentage you have acquired. Generally, the figure of external investors, capital apart, is considered assets, since they will share their experiences and knowledge for a project that will now be common for both parties.
the investment round
The way of contacting companies and investors, is usually through an investment round. Of all this procedure today we focus on 3 concrete stages:
– Preparation of the proposal ( Business Plan ).
– Dissemination and call for possible investors.
– Presentation of the business plan.
Without a doubt, it is the first point that acquires the greatest importance in this process, since it is the value proposition that is carried out to capital holders. As we said, it is not a loan without more, but the possible inclusion in the company of a figure that may decide not to do so if it does not perceive or contemplate security, solvency or, directly, it does not receive enough reasons to bet on the proposal. The importance of a business plan or Business Plan lies in the fact that it is a document with double utility: internal, since it helps to reflect and sitting bases for the company; and external, since it is the cardinal point on which the company will base its formal presentation as more than a project.
the business plan: what investors want to hear
The content is conditioned to the idiosyncrasy of the situation, that is, depending on the type of company, needs raised, possibilities of expansion, or simply, development in them, the b usines plan for Investors will present a different extension and formats. However, we can raise, roughly , a series of key blocks that must answer:
– Corporate identity : It is about responding to the 6W . Who are you and/or sois (company, in a flash identify), what are you doing (products or services), why you do it (mission, vision, values and positioning you are looking for), since when you do it (Trajectory), how you do it (added value) and where you do (take muscle, but don’t lie). It is convenient to point out in your career also those reference points with which your SME tells: recognition, solutions to past problems, alliances, agreements and other points. Think of everything that in a real way your company composes.
– environment : competitive and general. Or what is the same: potential market, sector (competition), legislation (if there is any key aspect that affects investment), DAFO and CAME … Speak with frankness of any external element to your company that affects or can influence In the development of your SME it will be perceived as knowledge and security. Capital here clarify the situation through CAME analysis.
– customers and sales : investors need to know your livelihood, both current and future. Describe your evolution in billing. Talk about your short, medium and long term sales strategy. Expose the strategy without fringes: here you play it.
– Economic content : balance, ratios analysis, investment you need, investment in personnel, how you carry loans, who you owe, direct and indirect fixed costs … This is the most important point of the most important point of the plan. Do not be wrong: investors want to make money with you, therefore, you will have to explain well that this will happen.
pitch deck or presentation to investors
Apart from the content that investors want to listen, there is a determining aspect when closing a deal: the way in which the proposals are presented. In this sense, it is evident that the type of presentation will make the rest, both for good and for worse.
It is not the same power of persuasion that of an entrepreneur in a pitch deck or in a written presentation. In any case, in a personal meeting, factors such as nonverbal communication, the control of the situation – even eventualities or problems that arise ‘live’ – or the lexicon used. Our advice is always to bet on naturalness, but always taking into account that “ before anything, preparation is the key to success (Bell), so that becoming familiar with the language of the Investors will facilitate things a lot. It is appropriate to familiarize yourself with the strategic reading of your SME balance, to argue certain economic estimates, or even discuss some non -conformities of your possible investor. We return to the same: think it is your money, therefore, it offers confidence.
If, on the contrary, it is a written call, we dare to place a success percentage of around 70 – 80% dependent on the content itself: neither ambiguous lexicon, nor a reproduction of economic theories. What corresponds at all times. If we are talking about the legislative section, it is enough to reference the meaning of the law citing it as an annex for consultations apart. If we are immersed in the sales section, it is enough to use the numbers well to show it clear. If we focus on our identity, it is enough to expose all aspects in a concise manner and with a specific lexicon. Special mention, the design of the business plan itself will deserve, which as with the lexicon, the more concise and adapted to what is requested (clarity, intelligibility and trust/security generator), the more it will help you in your purpose: add support of capital.
one of our specialties
As you can see, in the section on investors there are certain complex aspects to successfully achieve the desired capitalization. The applied technical elaboration of a Business Plan and its subsequent defense before a group of investors requires specialized advice in this matter. Our team usually performs this type of services, therefore, if you are thinking of undertaking an investment round, we invite you to talk to us. Contact us in firstname.lastname@example.org
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