How to be Investor Ready: A Guide for Companies Seeking Capital

By Reuben Buchanan, Managing Director – Axstra Capital Pty Ltd

As corporate advisors, we meet with many companies who seek investment capital to help with the growth of their business. But attracting investor capital depends greatly on whether they are “investor ready” or not.

Recently, a company in the building industry approached us to raise $5m capital for them. They were well established and profitable and had the opportunity to expand overseas and required the funding to finance their expansion.

After a short period of due diligence, it was apparent to us that they were far from being “investor ready”. We prepared the following check list for them and are now working with them to implement it before we approach any investors.

The check list covers the major issues that an experienced investor will look for (and expect) before they invest:

  • Experienced and stable management team who are knowledgeable in their industry as well as being capable of successfully implementing the business plan and managing the company’s operations. Investors invest in management who are committed to the long term success of the business
  • Realistic business plan containing a sound business strategy for growth
  • Achievable financial forecasts with potential for high returns on investment (ROI)
  • Excellent business growth potential with rapidly growing sector
  • A willingness to include, if required, the Investor in the management of the business or to join the Board of Directors
  • A comprehensive understanding of the customer  and target market, including market size, demographics, trends, pricing strategies, accessibility, growth potential,  demand for products and services and commitment to business development
  • A clear idea of the valuation of the business, the equity available for the investor and a strategy for the exit for the investor
  • Efficient internal accounting, financial systems and reporting
  • Detailed use of funds statement, describing how the investment capital will be used
  • A clear point of difference against competitors. This could be in the product itself, distribution strategy, location, technology, patents or other unique competitive advantages

Approaching investors unprepared is probably the single most common reason why entrepreneurs fail to attract capital. Some investors see 10 or 20 deals a week. If your proposal does not include most or all of the above, chances are you won’t get past first base and the investors are immediately onto the next deal.

However once you learn how to make your business “investor ready” and you succeed in attracting an investor the first time, going for subsequent rounds of funding, or funding a new venture becomes much easier. Hence if you want to become a successful entrepreneur, it’s worth spending the time and effort to learn how to make your company “investor ready”.

IMPORTANT: This information is general and should not be taken as specific advice. Readers should always seek their own professional advice. For more information, please email enquiries@axstra.com.au

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