Preparing for Investment

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If you’re looking to raise funding, you’re going to be asked lots of questions by investors about you and your business.

It can take time but the information you’ll need to get together, is also the thinking that will help you plan and sustain your business.

Here’s some areas you should think about:

1. You and your team

It’s people who make and sell the services, products and content we consume, so any investor will want to know about you, your leadership team and the key people involved in your business. Give them a good idea of your track record and don’t be scared to talk about your achievements – your track record in getting content to market and previous experience and successes are important.

You should also acknowledge any gaps in expertise and clarify what you are going to do to fill these gaps. E.g. We believe an MD/FD/Head of Sales etc with [x defined] skills will help us achieve [y]. We’re going to do x + y to bring in this expertise. Makes sure that this is costed in the business plan.

Do you have skin in the game? All investors will want to see that the businesses they are funding are committed to success so demonstrating how and where you are invested in the company is important. This is especially important in a talent industry like games, tv or film so demonstrating how key staff are being incentivised should also be considered.

2. Your company

You need to have a simple explanation of what you do and your business plan. Do you make content or sell content? Do you provide a service? Who are your customers, what’s different about you? What’s your USP?

Think about how you articulate you vision and purpose – why do you exist and what do you want to achieve? Take time to think and articulate your goals.

What’s your business model and how do you make money? Sounds simple but take nothing for granted and succinctly explain your business model, and your marketing and sales engine. Succinctly explain your assumptions and what you’ve based these on.

3. Your product or services

Whether you make products or content, sell them or provide a service that other businesses use, investors will want to know more details of the product or services that forms the basis of your future plans:

  • The Market and Competitors – don’t assume that your investors will know the market. Provide a sense of the scale of it, then drill down to show the market for your particular product. Use any competitor comparisons to help them picture the size of the opportunity
  • The Content – If you make content and/or sell content give some information about the genre. Or if you produce games, the gameplay (and how the games play) – what it’s similar to and how it’s different.
  • IP – Give an understanding as to the current value of any IP that you own, whether that’s content or technology. Outlining how this is assessed is also useful.

4. Why do you need investment?

This starts with clarity on the goal you want to achieve with the investment. Are you clear about the purpose and impact on your business of taking the actions you are describing?

You should think about what kind of investor you are looking for, any added value you’re looking for and what you are prepared to offer your investors in return?  For example, equity funding could bring you expertise that can fill the gaps in knowledge and a wider network, a loan repayment might allow you to remain more independent, a revenue share with a publisher will provide with expert routes to market, etc.

Show clearly what the money you are raising will enable you to do and how this will unlock growth or create resilience within your business.

Investor returns – Weigh up what are you’re prepared to offer you’re your investors in return? For example, how much equity would you be prepared to offer and how have you valued your business. If you want to borrow some money, how will you repay this? What revenue share split are you comfortable with if you work with a publisher.

Once you’ve fixed on an investment route, give some narrative that explains the business model, your timetable and the when investors might expect to see returns. What are you prepared to offer you’re your investors in return?

5. Continuity planning

If your business is affected by the Covid 19 pandemic you should expect questions around how you’re managing your business through this difficult time. Give investors clarity on what actions you are taking to sustain your business. Here’s a few suggestions:

  • Seek extended payment terms from energy and utilities providers
  • Assess which supplier payments could be delayed, or terms renegotiated
  • Ask large customers to pay any outstanding bills (especially public bodies)
  • Rented property – approach landlords for a rent holiday
  • Business Interruption terms should be checked carefully to see if COVID 19 is covered. (If you have cover for pandemics / Government enforced closure, then the you should be covered due to the 17.03 agreement between the Government and the ‘insurance industry’ that advice to avoid social gatherings by the Government is enough)
  • Government – HMRC – have time-to-pay arrangements been requested for NI, PAYE, VAT and Corporation Tax? (0800 0159 559)
  • Government – HMRC – A dedicated helpline for businesses in financial distress to receive support with their tax affairs. Further resources have also been provided to the HMRC Time to Pay arrangement, and HMRC will also waive late payment penalties and interest where a business experiences difficulties contacting HMRC or paying taxes due to Covid-19.
  • Government – R&D tax credits are not just for technology businesses; innovation in e.g. sales and marketing can qualify for R&D tax credits.
  • Government – multiple COVID related plans have been announced, summarised here and here.

*Beware of state aid limitations for the CBILS scheme.

6. Finance

You’ll of course need to provide some numbers. The type of financial info you provide is specific to the type of investment you’re looking to access. But for higher value investments and equity you should pull together the following:

  • Summary Page
  • Assumptions Page – for content this needs to be informed by the marketing plan and the knowledge, and data that underpins the strategy
  • P&L Cashflow (Informed by assumptions. Ideally 1 year of actuals with 3 years of P&L projections. Maybe more if development period is longer)
  • Balance Sheet Cashflow (Brings across info from P&L, ideally 1 year of actuals and 3 year of forecasting)
  • Cashflow (1 year of actuals with 3-year forecast.

Tips

  1. Commerciality and the ability to provide return on investment is the priority. Make sure this is clearly demonstrated.
  2. Keep the business plan to the point but cover all bases.
  3. Instinct isn’t enough! Calculate all possible costs in order to ensure that your financial modelling is appropriate. Figures need substance and justification otherwise they won’t stand up to scrutiny.
  4. Collate your business plan and financial plan assumptions into a single page so they are available to the reader.
  5. Be clear on how scale/growth is achieved. A + B + = Growth
  6. Have good advisors ideally as a board but if not as an advisory team. Useful to surround yourself with people who can fill the gaps in knowledge. Let us know who they are and what they bring to the team.
  7. Strong and reliable market data can be really compelling, especially where it talks about opportunities and trends.
  8. Accuracy of information is also important. Get someone to double check your work. Simple errors can give a bad impression of the business.
  9. Don’t assume the reader knows as much as you especially when it comes to sector and market information or technical information.
  10. Many investors don’t get past the summary page so make sure your business plan has a strong and compelling executive summary.

Find out how the Creative Growth Finance Debt Fund can help your businesses scale up here.