Business Finance Archives - Page 5 of 9

Finding working capital

Posted on January 19, 2019 Written by Administrator

Sufficient working capital is essential to any business. It is defined by the simple equation of current assets (including debtors) minus creditors, explains the website informi.

The answer indicates the overall financial health of the business in terms of its ability to meet its short-term debts and liabilities – which it must be able to do to continue trading.

Working capital is closely related to another critical indicator of business performance, namely cashflow. Cashflow is literally just that: the net amount of cash held by the business after the deduction of cash paid out from cash received from trading activities.

Although the amount of working capital that is required varies from one company to another, depending on its trading profile, there are likely to be times when working capital or cashflow are under sufficient pressure that additional external funding is necessary in the shape of business finance.

Business finance

That business finance may come from a number of possible sources – including a business finance loan. The Institute of Chartered Accounts in England and Wales (ICAEW) and the British Business Bank have jointly authored a comprehensive guide to all these sources in their Business Finance Guide.

It may be worth reviewing some of the most commonly used sources for major or relatively modest boosts to your working capital:

Business angels

in its detailed report for 2018, the UK Business Angels Association (UKBAA) claimed a membership of some 15,000 business angels at work in the UK;
these are wealthy individuals – you might have seen some of them on the popular TV show the Dragon’s Den – prepared to invest funds in a business in return for a share in its equity;
since you offer a share in the equity of your business, of course, you may also expect the investor to claim a share in the decision-making too;

Equity release

a further way for a company to raise business finance in its own right is through equity release on any commercial property it owns;
equity release – effectively remortgaging the property – is commonly used by home owners as a way of releasing capital in their home but may be an equally appropriate way for any business to make the most of its property assets.

Cashflow finance

Although angel investment or equity release may offer ways of raising the business finance necessary for major projects such as the acquisition of other enterprises or the expansion of your business, there are also times when it may be needed to resolve immediate or ongoing cashflow problems.

Factoring

factoring offers a way of making the most of another of your assets – invoices receivable from your customers;
invoices receivable may be sold to a factor, who pays an upfront value (typically around 85% of their value) and the balance – after deduction of the factor’s commission – once the debts have been recovered;

Invoice discounting

this is similar to factoring, but invoice discounting leaves you responsible for the actual collection of invoices receivable, whilst receiving an upfront credit on their value;

Trade insurance

trade insurance effectively maximises the value of invoices receivable – boosting your business finance available – by indemnifying you against those customers who fail to pay your invoices or who fall into bankruptcy or insolvency.

There exist a number of ways in which you might boost the working capital available to your business – ranging from a business loan to the major investment likely to be required for business expansion or the acquisition of other businesses to your need to improve cashflow.

5 Reasons why you should crowdfund your small business in 2019

Posted on January 16, 2019 Written by Administrator

As the bells and fireworks signal the dawn of another new year, we feel just enough optimism to make ambitious resolutions that, while well-intentioned, are often ditched come February. Rather than recommending you neglect Netflix in favour of a gym membership or swap your weekend (and evening) drinks for kale smoothies, I’d instead like to give you five reasons why 2019 is the year you should crowdfund your business.

Crowdfunding is seen as a more viable fundraising option than banks for entrepreneurs

While many might assume that banks are the go-to for business funding, this option now falls behind crowdfunding amongst entrepreneurs, according to EY’s 2018 Fast Growth Tracker.

EY’s poll of 380 UK business owners showed that while venture capital fundraising came out on top, 20 percent of entrepreneurs view crowdfunding as the most viable fundraising strategy for their businesses – a higher proportion than the 19 per cent who chose bank financing.

https://www.ey.com/uk/en/services/specialty-services/ey-tmt-hub-services-fast-growth-the-ey-fast-growth-tracker

Crowdfunding campaigns are bringing in more and more funds each year

The transaction value of UK crowdfunding campaigns shot up by 12.6 per cent to £58.2 million in 2018, according to Statistica. In 2019, the increase is projected to be even larger, at £66.4 million – a 14.1 per cent growth on 2018.

This growth trend is projected to continue year-on-year to at least 2023.

https://www.statista.com/outlook/335/156/crowdfunding/united-kingdom?currency=gbp#market-revenue

The UK is the best place to crowdfund in Europe

According to research from the University of Cambridge’s Judge Business School, the UK is leading the way when it comes to crowdfunding and peer-to-peer lending.

While the UK’s £4.9bn alternative finance market is the largest in Europe, the European market is still growing remarkably fast. So for early and growth stage businesses, there are huge opportunities right across the continent.

https://www.jbs.cam.ac.uk/fileadmin/user_upload/research/centres/alternative-finance/downloads/2018-ccaf-exp-horizons.pdf

Crowdfunding ‘will be worth more than any one charity in 2019’

The income generated by crowdfunding will be worth more than any single charity by 2019, according to JustGiving’s CMO, Charles Wells.

Wells put this prediction down to the fact that crowdfunding platforms are attracting swathes of young people – a key demographic that charities struggle to engage.

I know from experience that crowdfunding attracts many young tech-savvy entrepreneurs with fresh, innovative and disruptive businesses ideas. It also draws in a new generation of young investors who are accustomed to using technology to connect with others, sniff out opportunities, and make their fortunes.

https://www.thirdsector.co.uk/crowdfunding-worth-one-charity-2019-says-charles-wells/fundraising/article/1433419

Crowdfunding is a great way to grow and engage your customer community base

New investors are likely to become customers, particularly if you offer discounts or exclusive products and services during your campaign. These new customers are also likely to be your most loyal and vocal supporters who will sing your praises and challenge your critics online.

Crowdfunding campaigns also offer a unique opportunity for your business to run a dedicated marketing and communications campaign. It’s the only period in your company’s lifetime that every pound you spend and every media spot you gain contributes to bringing in new customers and investors, which effectively doubles the reward of your efforts.

To make sure you get the most out of the opportunity, it’s really worth recruiting a seasoned PR professional to lead the media push.

Each campaign you run raises your profile amongst a constantly growing crowd, puts your business and idea through an important vetting process, and brings you valuable feedback that, if implemented, can help your company thrive.

As we make our way into the new year, there are an infinite possibilities for you to evolve your business, grow your tribe of supporters and boost your entrepreneurial credentials. I wish you the best of luck in the year ahead!

About the Author

TribeFirst is the world’s first dedicated marketing communications agency to support equity crowdfunding campaigns. John is also Virgin StartUp’s crowdfunding trainer and consultant, helping them to run branded workshops, webinars and programmes on crowdfunding.

In February, John is running a series of global crowdfunding bootcamps alongside Grant Thornton – who support businesses seeking early-stage funding – and leading equity crowdfunding platform, Crowdcube. The bootcamps aim to help entrepreneurs prepare to raise money via equity crowdfunding in just five weeks.

Links

Website: https://www.tribefirst.co.uk/

Facebook: https://www.facebook.com/TribeFirstCrowdfunding/

Twitter: https://twitter.com/Tribe1st

Instagram: https://www.instagram.com/tribefirstcrowdfunding/

5 reasons why you should crowdfund for your business over Christmas

Posted on December 19, 2018 Written by Administrator

Christmas might be a time for giving, but the common perception is that it’s not a time for investing. The thinking goes that nobody wants to run an equity crowdfunding campaign over the Christmas holidays, because who’s going to invest when they are full of turkey and mince pies? I also think it’s a psychological thing – everyone wants to close their investment round well before the end of the year.

But let’s be clear, the New Year is a mental construct – it doesn’t really exist. And importantly during the holiday season investors finally have some time on their hands. So, for the entrepreneur that’s willing to work for it, there is liquidity to be had. I reviewed the data on crowdfunding data programme, TAB, and amazingly it appears that December was the most funded month in the crowdfunding sector in 2017. In total, £123m was pledged across 199 campaigns, versus January, February and May of the same year, each of which experienced just over £40m in pledges.

So, why is December such a good time for receiving?

Investors have more free time

As I mentioned above, investors have more free time in December. Pre-Internet, the investment community would shut down over the summer months and Christmas, but that’s simply not true anymore.

Bonuses

Not everyone wants to spend their bonus on presents and parties! Bonuses are paid at many different times of the year, but Christmas is the most common. Bankers typically get their bonuses in January, so that’s typically considered a more liquid month for traditional investing. However, crowdfunding appeals to retail investors – ‘everyday’ people who are far more likely to get a bonus before they finish work for the year.

Closing off a funding round before the new year

As mentioned earlier in the article, many entrepreneurs want to close their funding round before the end of the year – they hustle harder so they’re not campaigning over the holidays. Given the amount of liquidity there seems to be over the Christmas period, I would take advantage of this and plan activity for the week between Christmas and New Year – a time where lots of investors will be browsing, but not many entrepreneurs will be active online.

Filing tax returns

Many people like to take the time during the holidays to file their tax return before the end of January deadline. Often this is the first time an investor realises how much EIS or SEIS tax relief allowance they have left to use. I know many investors who will invest as much as their income tax relief allows them to!

The ‘holiday effect’

This article in Psychology Today talks about how stock markets often experience the “holiday effect”, which causes them to be more optimistic about the state of the market due to their mood. A study by George Marrett and A. C. Worthington concluded that investors are more likely to be in a buying state of mind due to “high spirits” and “holiday euphoria”. They even went as far as to argue that the holiday effect accounts for some 30 to 50 per cent of the total return on the US market in the pre-1987 period.

So, what does this mean for unlisted private companies raising funds through crowdfunding? I would argue their investors are just as likely to experience the holiday effect. In fact, given the highly risky nature of early stage startup investing, I would further argue that the holiday effect is even more pronounced – it might encourage an investor to express greater risk appetite than they would normally do. Great news then for companies that are campaigning during the holidays.

So, the evidence seems to be that Christmas isn’t such a bad time to run your crowdfunding campaign. What you do need to bear in mind if you decide to go for it, is that running a campaign is all-consuming. This means you’ll need to negotiate with your family in advance so they understand what you’re doing. With luck that will keep them sweet and you’ll be allowed your festive dinner along with the investment you gain.

ABOUT THE AUTHOR

John Auckland is a crowdfunding specialist and founder of TribeFirst, a global equity crowdfunding communications agency that has helped raise in excess of £14m for over 45 companies on platforms such as Crowdcube, Seedrs, and Seedinvest – with a greater than 90% success rate. TribeFirst is the world’s first dedicated marketing communications agency to support equity crowdfunding campaigns. John is also Virgin StartUp’s crowdfunding trainer and consultant, helping them to run branded workshops, webinars and programmes on crowdfunding.

See: http://www.tribefirst.co.uk

Twitter: @Tribe1st

What is peer to peer business finance?

Posted on December 16, 2018 Written by Administrator

Peer to peer lenders are the matchmakers of the business world. They bring together scores of individual savers and investors and match them with businesses looking to borrow money.

Peer to peer business finance is conducted through an online platform that matches individual investors to the businesses in search of loans, so effectively cutting out the role of a bank or other lending institution.

Without a bank or any other middleman taking its commission on such transactions, investment in peer to peer business finance offers the potential for considerably higher rates of interest paid to investors or by borrowers. For borrowing businesses, one of the further principal attractions is the ease and speed with which it is typically possible to arrange the necessary business loan.

Although a relatively new form of lending, peer to peer platforms have gained considerable attraction and success.

How it works

Peer to peer lending works in slightly different ways depending on the particular online platform.

Some platforms, for example, allow investors to choose which businesses their money is lent to, whilst others make that decision on behalf of the investor, explains an article published by the Consumer Association’s Which? magazine in April 2018.

As a source of business finance, peer to peer lending offers borrowers streamlined, online access to funding in a straightforward, simple, and speedy way.

A business interested in borrowing this way makes an initial enquiry seeking a decision in principle. Typically, this involves seeking an initial decision in principle for borrowing the requested funds over a given repayment term. The decision in principle may be given practically immediately.

The next step is a formal application on the part of the borrower who describes the business and its current financial status. The online form containing that information typically takes little more than 10 minutes or so to complete – a far cry from the time likely to be taken in preparing the detailed business plan and cashflow projections demanded by a bank, for example.

At this stage of the formal application, a credit check is also made on the applicant business to ensure the affordability of the loan and the borrower’s credit worthiness. Indeed, some peer to peer lending platforms allow investors to choose the credit worthiness of a borrower – offering higher rates of interest on loans considered to carry greater risk.

Thanks to the streamlined processes adopted by peer to peer lending platforms, the formal application may be considered in as little as 24 to 48 hours. If approval is given – and accepted by the borrower – the funds may be transferred directly to the company’s bank account within a matter of days.

The future of peer to peer business finance

Since peer to peer business finance is still in its relative infancy, the rules governing its further development continue to be shaped by the regulator, the Financial Conduct Authority (FCA).

Some of the issues currently under consideration by the FCA are described in greater detail in a report by the Financial Times on the 6^th of August 2018.

A small business guide to invoicing

Posted on November 29, 2018 Written by Administrator

For a freelancer or other small business cashflow can be tight. Money is literally the lifeblood of one’s career and managing it is essential for survival.

Good invoicing forms part of this. Sending out clear, concise, well-designed invoices is important to get you paid – and making it easy for your clients to pay you is necessary to get you paid on time. After all, the last thing you want is a chase.

New to it all? Not to worry, it isn’t rocket science and good invoicing is achievable overnight. Here is a handy guide to get you started.

What is an invoice?

An invoice is an important accounting document that requests payment in return for goods or services. It indicates what must be paid for, when it must be paid for, and how the recipient can pay for it. That’s the concept in a nutshell.

What should an invoice include?

An invoice should always include:

The word ‘invoice’
The date of issue
Your name or your business name
The client’s name or their business name
Yours and your client’s contact information
A unique invoice number (for good bookkeeping)
The amount your client owes you
Your payment details
Your payment terms and conditions

If you want to get paid on time, make sure you use a clear and concise design so that your client can identify important information quickly.

What format should an invoice be in?

You can design invoices using any tool and in any format you like. Many freelancers send their invoices out as a Word document, PDF or even Excel (we wouldn’t recommend this as it’s harder to brand and a little accountancy-like) and others make use of available invoice templates – more on that below.

If you do decide to use an Office application for your invoices, make sure they are saved in the Open Document Format, so your customers can actually open them. We can’t tell you how many times we’ve seen late payments occur because invoices can’t be opened by the client. We also recommend making your invoices read-only to avoid invoice fraud (this is where your customer edits the invoice to a lower amount).

Design matters too. Just like the wonderful product and service you provide, it’s also important to make a professional impression with your invoices.

A beautifully designed invoice adds a finishing touch to your service. We recommend you go down the customised route, and invoicing software is a great place to start. Services like Solna have templates ready and waiting for you to use which you can customise and brand to your heart’s content, and download as PDF or send through the platform. It beats slogging it out on Word.

Invoice payment terms

As a freelancer, you make your own hours and set your own payment terms. While some projects will call for you to bow to the payment run of the client, most of the time you’ll be able to dictate when you get paid from within your invoice.

Net payment terms are the most common with freelancers. Net 30 means you request payment within 30 days of invoice receipt. Net 7 is 7 days, Net 10 is 10 days. You get the idea. The issue with these terms is there’s no guarantee the customer will pay. If you take on one-off clients you might want to skip to the next option – upfront payment.

Upfront payment, or payment in advance, safeguards your time and cashflow. Some businesses aren’t comfortable with it, so it’ll be up to you to forge trust in the relationship and win them over. If they won’t pay you upfront, then to be honest you should question if they would have paid you at all. You might have dodged a bullet.

If you have recurring customers, you have two choices: raise invoices manually or invest in software that’ll automate the process for you. Automating the sending of invoices will free up your time and give your customer continuity.

Whatever terms you choose, make sure you keep on top of who’s paid and who hasn’t or else you’ll find yourself with cash flow issues pretty quickly. You might need to do this manually depending on the system you use. If you’re using invoicing software, you should get alerted when you receive payment or if payment is overdue.

How to send your invoice

It is standard practice to send invoices via email with a High Importance tag. In Outlook, you can request a read receipt which is a type of delivery notification – but it should be said this is self-enrolling, so the receiver can just say no to it. If you do send your invoices by email, then ask your client to confirm receipt.

Your email should have a subject header with the word ‘invoice’ in it, your company name and the month/ year. Here’s a good example:

Solna.io, Invoice, December 2018

This is short, sweet, to the point and absolutely perfect.

Your email should also have a short and concise message body. Here’s a good example:

Dear [business name],

Please find attached our invoice for December 2018.

This is due for payment by [insert payment terms].

Kind regards,

Jenni Doe.

It’s also important to keep accurate records of your invoices with back-ups. Store them locally on your computer for off-network access and in the cloud for access anywhere with an internet connection. You never know when you’ll need a copy of an old invoice. If you’re using an invoicing software, you’ll probably be able to save them there. If not, there’s a ton of good (and free) cloud services like Dropbox and Google Drive. Microsoft OneDrive is a good choice because it syncs with your desktop folders.

Getting paid on time will ensure you keep going. Always keep on top of your debtor situation and track your invoices. If you do this you can put more of your energy into your work rather than into your admin.

ABOUT THE AUTHOR

Inna Kaushan is co-founder of Solna, a smart invoicing platform powered by credit score data. Solna speeds up the invoicing and payment process for freelancers and small businesses. Through leveraged credit data that is overlaid on the platform’s invoicing and reporting functionality, users get a clear picture of their customer’s financial health and their overall exposure to risk. The system’s automated credit control functionality automatically chases overdue invoices – freeing up time and ensuring faster payment.

Web: https://solna.io/

Twitter: @solna_io

Facebook:@Solna.io

LinkedIn: Solna

Seven things that (you never knew) are stopping investors investing in your company

Posted on November 28, 2018 Written by Administrator

Raising money is a time consuming endeavour. And there’s nothing worse than spending your precious time on activities that are at best ineffective, at worst actively putting investors off the idea of funding your business.

So what common mistakes do entrepreneurs often make when looking to raise money for their business?

Failing to surround yourself with the right people.

This is the biggest mistake start-up founders make. It comes as part of the territory that entrepreneurs will be experienced beyond their years, overachievers and disruptive to the old guard in their industry. So they tend to overestimate their own abilities, and underestimate how much an investor needs reassurance that the team is reliable. For an investor, the most investable team is both disruptive and has industry experience, while also being able to demonstrate they are amongst the best in the business.

You don’t need to have personally spent half your life working on your trade – it’s actually very easy to get board advisors for your company to tick the industry experience box, who only need to attend an annual AGM and be available for the odd phone call. As a bonus, they will quite likely save you a fortune and stop you making critical mistakes, all for a relatively small retainer or a bit of equity.

I recently watched Feral Horses (https://www.feralhorses.co.uk/) pitch on Dragons Den – a company we once considered supporting during their Seedrs crowdfunding round in early 2018. They’re a platform for art lovers to buy shares in contemporary artworks, democratising art ownership. Three young graduates stood up to pitch, and every Dragon pulled out on the basis of the team being too green, and we declined to support them for similar reasons. If they’d just taken an experienced gallerist with them, they would have probably had offers all around.

Not knowing your numbers

How did you arrive at your valuation? What’s your run rate? What’s your burn rate? When do you break even? What’s your year 1-3 forecasted EBITDA (earnings before interest, tax, depreciation and amortisation)? These are all perfectly valid questions from an investor, and it’s surprising how few entrepreneurs can answer them. If all of this sounds like gobbledygook, then go and research some key phrases on Investopedia before you start to speak with investors. Better yet, look on the forums of crowdfunding platforms such as Crowdcube and Seedrs to see what questions commonly pop up. Generally speaking, they are the same questions that investors regularly ask.

If you’re not naturally numerate, learn the key highlights about your financials from memory. All of the questions listed above should be presented in an executive summary anyway, and even the most financially illiterate entrepreneur can memorise a one-page document.

Being wildly over ambitious, or under-ambitious, with your forecasts

A close cousin to being forgetful of your numbers, is having wildly unrealistic forecasts. This will also quickly turn an investor off. You’re an early stage startup, or a young company about to see unprecedented growth/change, so no one is expecting you to be accurate. But an investor is expecting you to be realistic.

Your numbers should tell a story, showing spikes in sales when a new salesperson is employed or a new revenue stream initiated. They should show growth in line with market trends, and comparisons to competitors. Your forecasts are designed to reveal your workings, and to show you have a grasp on your industry. They’re not there as a performance record to be checked back on retroactively.

If your forecasts are underwhelming then it can be telling that there might not be as much growth potential as you first thought. An investor in an early stage business wants potential of at least a 3-5x return on investment (ROI), otherwise it’s not worth the risk. On the other hand, if your business model suggests growth akin to the early social media platforms, like Facebook and Twitter, then you will quickly turn an investor off. It’s doubtful that Facebook’s early forecast ever predicted its meteoric rise.

Of course every investor is searching for that investment opportunity with unicorn potential (a unicorn being a magically rare company that achieves a $1bn+ valuation within its first decade of trading). But let them be the judge of your potential. Suggesting they’ll only start to make serious money when you have captured 10% of the world’s population will stop them reading past the first page of your deck.

Pitching the wrong valuation

Of course we know that entrepreneurs pitch the wrong valuation, it’s one of the things founders stress about the most when they first start working with us. What most people don’t know is that it’s actually very easy to avoid going in too high, or indeed too low. And it starts with putting together a realistic set of forecasts (see point 3).

From having worked with over 50 startup or growth companies, and from speaking with hundreds of investors, I believe there are three central pillars to a sound valuation:

It’s in the right band – believe it or not, most investors are looking at the amount of equity on offer in the round. You should ideally be offering between 10-25% per round. If it’s outside of these parameters, then questions will likely be asked. That’s fine if you have good answers, however.
You can compare it to companies in your sector – search other companies on Crunchbase, Beauhurst or TAB to see what valuation they achieved at a specific stage in their fundraising journey. Try and find some common denominators in your industry. For example, it’s common in tech for companies to be valued based on their number of active users.

Food and beverage companies tend to value based on an EBITDA multiple. For really early stage companies, it’s even easier than this – just find out what a competitor successfully raised in their seed round and at what valuation, then make sure you’re in the same ballpark.

There is a logical argument to the valuation – once you’ve established a point of comparison, try to use that to build a logical argument for your valuation. For example, if you’re a haircare brand, you can use the example of Unilever buying TIGI for 1.65x the annual revenue they were generating ($411m based on a $250m stable annual revenue). So a logical argument would be to say something like the following –

Our projections suggest a turnover of £8.5m in year five. TIGI sold to Unilever on a 1.65x turnover valuation, therefore we would be valued at £14m using the same methodology. So our current valuation of £1.4m would provide you with around 10x ROI.

This is just one example. You can present any argument you can come up with, as long as it involves numbers that are easy to understand, is linked to a strong comparison, and is clear and logical.

Not being crystal clear with your message

I run accelerators for Virgin StartUp and crowdfunding bootcamps with Grant Thornton, and on both of these programmes I spend around 70% of my time showing the entrepreneurs how to refine their message using fewer, better words. Importantly, we show them how to produce communications with the utmost clarity.

I’ve seen companies attempt to raise funds using their advert or product video as a tool to engage an investor. Sure, show an investor your product, but more importantly sell them your vision, show the market potential, reveal what they can potentially earn from joining you on your journey. If you have a choice between clarity and creativity, opt for the former every time.

Being frivolous while raising funds

Sometimes an investor will pull their investment if they think you’re spending your money too frivolously. I’ve seen it happen a number of times on crowdfunding campaigns in particular. It stands to reason – you’re meant to be growth hacking and bootstrapping your way to success, not blowing all your profits before you’ve earnt them.

It’s also logical that entrepreneurs will want to look their best when they’re raising funds, so the temptation to spend a load of money on an expensive video, hold a big event or fork out for flashy rewards is understandable. But nowadays it is easy to spend little on a video but still achieve a high production standard, to hold a webinar rather than an event, and to gift your investors with rewards that are free or low cost for you to produce.

I won’t name any names, but one company, which crowdfunded recently, held a big party to celebrate reaching their target. They were involved in the events industry so leveraged all their personal contacts and made sure the event cost them next to nothing, but they gave the impression that it was a lavish affair. One investor pulled their £30k investment as a result.

Raising when you really need the money

If you raise when you’re out of cash, you’ll come across as desperate, and will quite likely take a deal that’s stacked in the investor’s favour. Just like getting credit, if you apply when you don’t actually need it, you’ll end up with better deals. It also takes far longer than you think to get money in, so this will make the entire experience far more relaxing!

Bonus tip: keep your existing investors informed

Finally, as a bonus tip, don’t leave it so long before you start thinking about your next raise. I know it’s gruelling and hard work, but if you leave it to the last minute to tell your existing investors that you’re raising again, they probably won’t invest. If you regularly update them, and make them feel part of your journey, they are much more likely to follow-on into the next round.

Most investors enjoy the thrill of investing in early companies, and they like being able to tell stories of their involvement. If you leave them out of the loop, you’re depriving them of one of their main drivers for investing. With investment, communication is paramount.

Of course, I can’t guarantee you will be successful in your raise, but by following these tips, you’ll significantly increase your chances. Good luck with your raise!

ABOUT THE AUTHOR

John Auckland is a crowdfunding specialist and founder of TribeFirst, a global crowdfunding communications agency that has helped raise in excess of £5m for over 30 companies on platforms such as Crowdcube, Seedrs, Indiegogo and Kickstarter – with a greater than 85% success rate. TribeFirst is the world’s first dedicated marketing communications agency to support equity crowdfunding campaigns and the first in the UK to provide PR and Marketing campaigns on a mainly risk/reward basis. John is also Virgin StartUp’s crowdfunding trainer and consultant, helping them to run branded workshops, webinars and programmes on crowdfunding. John is passionate about working with start-ups and sees crowdfunding as more than just raising funds; it’s an opportunity to build a loyal tribe of lifelong customers.

See: http://www.tribefirst.co.uk

Twitter: @Tribe1st

Raising finance? Here’s how to create a killer pitch deck when raising funds

Posted on November 22, 2018 Written by Administrator

This article takes my experience of successfully funding around 50 companies and combines this knowledge with research completed by DocSend to find the perfect formula for an engaging, compelling and ultimately easy to digest deck.

Multiple decks

It’s a misconception is that you should have just one deck, it’s illogical. You engage with investors in a number of different ways, and your pitch decks needs to reflect this. As a bare minimum you should prepare three different documents before you start reaching out to investors:

The Exec Summary – a standalone teaser document that gives them everything they need to decide if they want to spend the time looking into the opportunity further.
The Presentation Deck – a version of your pitch deck that has only images and no words at all, which is designed to be presented over, either in person or on a video conference. Do you remember the last time you saw a TED Talk with a wordy presentation? No, because they ban the use of any words in a presentation, unless to highly emphasise a point. If you put words on a screen, people will read the words rather than listen to you.
The Investor Deck – this is what most people create in an attempt to fit everything into one document. But, of course, if it’s the first thing an investor sees, there is no context, and so the chances of them getting to the core of your opportunity are slim at best. The Investor Deck should be treated as a leave behind only, not something you send out en-masse, or a document you present over (again, they will read the words rather than listen to you presenting).

I have created a handy diagram, showing how and when these different documents are used. If you utilise these documents as they were meant to be used, and if you optimise them for that specific use, it will increase your investor engagement levels. I’ve been told that this approach slows the process down. That’s only true if you try to omit key information from the Exec Summary, or you present your pitch in the wrong order, or rush through it without focusing on the detail.

Order it right

Getting your Investor Deck in the right order is crucial. Rather than employing guesswork, you can build your deck around a DocSend / Harvard Business School study into 200 startups that completed their Seed or Series A rounds. This study tracked the effectiveness of these 200 decks, and arrived at the following as an optimised order in which to put your slides:

The Purpose – i.e. a summary of what you do and why they should care.
The Problem – the problem you’re solving, or more accurately, the market opportunity you’re meeting (since you shouldn’t use negative language in a deck).
The Solution – how your solution is uniquely placed in the market to solve this problem
Why Now? – Why is this urgent now? Was the market not ready before? Did the technology not exist to allow it to happen? Are you an evolution or a revolution? These are all important points – ideas fail to manifest either because they’re bad ideas, or because the market wasn’t ready for them, or because they hadn’t been thought of before. You need to prove to an investor that you don’t fit into the first category. And if you fit in the latter category, you should have a logical argument for why they haven’t been thought of before.
Market – a deeper dive into the size of the market, its trends and your potential penetration.
Competition – who else is tackling this problem? Make sure you do extensive research because if your investor finds a competitor you missed, it’s a surefire way of them exiting the opportunity. In truth, you want some competitors because educating an entire market on your own is expensive, or it’s a sign that the market isn’t ready. And everyone has competition. The competitor to the first motorcar was a horse-drawn carriage.
Product – a deeper dive into the product and any sales you’ve made so far. You need lots of evidence, stats and testimonials here if you can.
Business Model – how do you make money now? How do you make it in the future? How do you market your product/services and how do those costs fit into the overall model?
Team – this could arguably go higher in the deck, however if you’ve produced a good Exec Summary and Presentation Deck, you’d have already told your personal eureka moment and how you brought other people into your journey. Wherever you place it, show how every team member is relevant, and if they don’t add value take them out (of your team and your deck). If your team is weak in any one area, find an advisor or Non-Exec Director to plug the gap.
Financials – a financial summary, not ten pages of your entire financial model. Highlight the key areas of your financials and importantly show how and when the investor is likely to make a return.
It’s about them, not you

Your pitch documents are essentially marketing materials, and even experienced marketers make the mistake of talking from their perspective rather than the customer’s (for clarity, in your case the customer is an investor). Copywriters that get paid the big bucks have spent years refining this skill and still often get it wrong, so it’s not an easy task. However, there are some tips to help you deploy more empathy in your writing.

Visualise your perfect investor and write your documents specifically for them. Even go so far as addressing them in the first person, using the word ‘you’ to get the copy to speak to them directly (stopping short of naming them, of course!).
Read everything you write back out loud. If it sounds like a robot then the reader is less likely to engage with it. If it sounds like you’re having a conversation with them then they’re more likely to absorb themselves in what you’ve written.
And while you’re reading everything back to yourself, ask yourself of every paragraph, ‘why should an investor care?’ If you don’t have an answer you can probably cut down that sentence or delete it entirely.
Also use fewer, better words to get your point across. Strip as much as you can away without losing the meaning. Shorter copy is easier to absorb so it’s more likely the reader will make it all the way through.

Storytelling

Most of the advice out there focuses on the rational decision-making centre in an investor’s brain. However, investors are people, and the final decision as to whether they should invest is ultimately an emotional one. People relate to stories and narratives. These create empathy and build relationships, triggering all sorts of emotions as the investor imagines being in your shoes. Stories have structure – they have a beginning, a middle and an end. They have dramatic moments, and interesting but relatable side anecdotes. They provide so much more flavour and texture to your pitch, which helps the investor form an opinion about you.

Personalise

Finally, do your research on the investor you’re meeting with and personalise your materials accordingly. It’s amazing how much you can find out from LinkedIn. If they seem like the type who invests more on a gut feeling, then put your team slides and backstory at the start. If they come across as more analytical, or are known for having a scoring system for appraising new investment opportunities, focus more on the numbers, statistics and evidence. It’s a simple thing, but even putting their name on the front cover can have a profound effect.

If you follow these five steps, as the fifty or so companies we’ve helped fund did, then your chances of successfully finding an investor will increase.

ABOUT THE AUTHOR

John Auckland is a crowdfunding specialist and founder of TribeFirst, a global crowdfunding communications agency that has helped raise in excess of £14.5m for over 50 companies on platforms such as Crowdcube, Seedrs, Indiegogo and Kickstarter – with a greater than 90% success rate. TribeFirst is the world’s first dedicated marketing communications agency to support equity crowdfunding campaigns and the first in the UK to provide PR and Marketing campaigns on a mainly risk/reward basis. John is also Virgin StartUp’s crowdfunding trainer and consultant, helping them to run branded workshops, webinars and programmes on crowdfunding. John is passionate about working with start-ups and sees crowdfunding as more than just raising funds; it’s an opportunity to build a loyal tribe of lifelong customers.

See: http://www.tribefirst.co.uk

Twitter: @Tribe1st

What is cashflow finance?

Posted on November 7, 2018 Written by Administrator

There may be many reasons why from time to time, a business finds itself paying out money at a faster rate than it is coming in.

There are though two generic origins of such situations:

the business is simply not viable and its regular outgoings exceed and will continue to exceed its regular net income. We won’t be discussing this situation further here;
more commonly, although net income and expenses are favourable overall during a longer period, there are times when money is flowing out faster than it is flowing in.

The second problem above is commonly called “cashflow difficulty”. It might easily arise in situations where, for example, you have a major and profitable customer but they are slow in paying their accounts.

These situations and others like them are far from unusual but if left unchecked, they have the potential to cause serious financial embarrassment to a company or even its demise.

The good news is that cashflow finance may be available to help overcome this particular type of problem.

Cashflow finance

There are various possible routes to obtaining finance that can help to overcome such short-term but potentially serious challenges. They include:

invoice factoring;
invoice discounting;
credit control;
trade insurance.

Invoice factoring involves a third party (the factor) paying you a percentage of your invoices immediately. That might typically be around 85% of their value, with the factor then undertaking to recover the sums in total from your clients.

The balance will be paid to you once it is recovered. Your use of a factor will be visible to your clients.

Invoice discounting has some similarities but it involves you borrowing money from a third party against the value of the invoices you have raised. That will be done in advance of your client paying the invoice and the intermediary’s services will therefore typically be invisible to your customers.

Credit control services may be advantageous in situations where your company lacks either the scale or the experience required to effectively manage your own accounts receivables/sales ledger. The benefits of having experts controlling your outstanding invoices may be significant and secure your payments that much sooner.

Trade insurance is a slight variation on this theme. It is a form of cover which will mean that where a company perhaps goes bankrupt and is unable to pay your invoices, you will receive an agreed sum by way of insurance reimbursement.

All the above services will incur costs of one form or another but that should be recoverable via a build-in to your pricing structures with your customers.

Which solution is for you?

If you’re experiencing occasional cash-flow difficulties, the causes may be some of those mentioned above or indeed different sets of circumstances.

The cash flow finance solution you select will depend a lot upon the nature of the problems you are having and how visible you wish third parties to be to your customers.

Seeking the help of a specialist finance provider can help you find the most appropriate solution.

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