Neil Bellamy, head of technology, media and telecoms at NatWest, explores how tech startups can get themselves ready for that pivotal moment: raising funding.
Investment readiness is a term that can intimidate even the most ambitious entrepreneurs.
But if you’re smart in the ways you research, plan and ultimately present your venture, being investment ready could be the key difference between success and failure.
Setting your business plan, understanding your competitors and your figures, and leveraging your network are massively important. Careful management of cash flow enables you to survive then thrive, but it all starts with a robust business plan.
Get planning
Many startups can shy away from setting a business plan – we all know it’s easy to get caught up in the day-to-day necessities of getting a business off the ground and the constant pitching.
But setting a business plan not only helps you scope out your short-term goals, but allows you to benchmark your performance and look to the future with long-term priorities and ambitions.
Creating even a simple document filled with thoughts and ideas can pay dividends for any startup.
It could contain anything, like at what point you may need to employ additional staff, or even a calendar showing new business opportunities or milestones you want to hit – big or small.
Of course, when approaching a bank or potential investor then the more information the better – demonstrating the strength, capability and potential of the business.
Using your plan to set a contingency for economic downturn or competitor activity is also key.
Investors or financiers will also want to see a plan detailing how the funds will be used to drive the business forward.
Think big
Having big ambitions is great. However, you also need to demonstrate how you‘re going to make them happen. You have the vision, but what are the steps to make sure it materialises?
If there’s no demand for your startup or service, or if its associated costs are prohibitive, the chances of receiving investment are slim.
You must display a depth of knowledge about your industry, customers and business, have a clear idea of how you will make money, and have a good management structure in place.
Business bucket list
Having a business bucket list is also a good idea to make sure you keep yourself motivated. Starting a business is incredibly hard work – and the work continues as the business matures.
A business bucket list is not a million miles from a good old-fashioned business plan, but it has more to do with the more inspiring, punch-the-air moments than studying a spreadsheet.
A bucket list includes more personal challenges with a professional slant. Being in business to make money is extremely limiting; it’s better to have milestones that are symbolic of success to you.
The best tech entrepreneurs are rarely in it for the money alone, so include any goals you’d like to achieve on a personal level for the business. That could be anything from luxury holidays to hiring or training new young talent.
Anything that helps you get out of bed in the morning and keep striving for tech success will help.
So nurture your bucket list, and keep striving to tick things off it.
The best option for your business
Before you start to think about applying for funding, you need to be aware of the best possible solution for your needs. There are now a so many sources of funding available – and bank borrowing (debt) may not be the best option for your technology startup.
A lot of the time, when technology businesses are starting out and growing they are all about burning through cash, building a customer base and a scalable business. In this case, debt just isn’t the best option.
A simple debt-readiness test is to ask yourself: “Do I have a product that works and clients willing to pay for it?” If you don’t have both, then it’s too early for debt.
We, like most banks, are keen to work with our technology startups to guide them toward the best possible solution. Although this may involve handing over some equity, more patient funding may be the best route for many tech startups.
Now is the time
There has never been a better time to be a tech company starting up – particularly in London.
Thanks to new technology you can literally set up a business from your smart phone on your kitchen table – so getting a business started has never been cheaper or easier. There are also so many ways to use other people’s tech platforms to scale your business – from Salesforce and other CRM systems to the cloud – so opportunity and potential is unlimited.
Just be sure to understand your business, the opportunity and the market and also make sure you surround yourself with the best possible advisers and supporters to keep you on track.