Last month Franklin Rae and Edge Investments, the creative industries’ sector investor, hosted a roundtable breakfast for creative companies interested in learning about business growth and how to be investment ready. Over coffee and pastries, David Fisher, Investment Director at Edge Investments, took everyone through the routes required for raising money from institutional venture capital companies. Here he shares a few of his tips.
Know your audience
Before you approach a company – or an individual – for investment, make sure you know who you are pitching too. Whether it’s an angel investor, a trade company or an institutional venture capital company, know what information they will be looking for and tailor your pitch accordingly.
Be pitch ready
Have a pitch deck. It’s your meeting and this will allow you to control the narrative and tell your story. The deck should highlight your key USPs, your place in the market and your vision for growth. Why are you a good investment opportunity? How are you going to build your IP and grow the business? Don’t over load the meeting but have your key management team in the room. And make sure you each take roles and practice beforehand.
Build a financial plan
A written business plan will help you stand out, but the key is the financial plan. An institutional investor will require at least 12 months in detail, broken down on a monthly basis, and three years broken down on a quarterly basis, plus a detailed P&L and cashflow. The more detail the better. It shows you are on top of the business.
Make sure your plan is sensible. We will understand many companies are not going to sell to Google for £500m, and we don’t expect a plan that projects those returns on exit, but we are looking for companies that can grow to significant scale. We would like to see a sensible exit, based on your sector’s EBITDA multiple. For example TV Production companies usually sell on a multiple of 10x EBITDA, so understand the returns that are on offer to an investor from your plan. We don’t invest for hits, we invest in good solid businesses who are going to build their IP over a sensible period of time. Of course, we hope you have a hit…
Know your numbers
Be in shape when you go to pitch for finance. Make sure you have someone who understands your numbers attend the meeting, but even better, make sure you do. Be ready to answer any questions.
Identify your key hires
There’s three things a VC looks for – management, management and management. Managers and entrepreneurs build the business. We need to know you have the ability, the vision, the drive and the energy to win work, deliver work, manage your finances, manage your team and grow a business. Hires we like to see in place include sales, financial and operations, plus the key creatives. In a content related business we do understand the mix of business and creativity, that blend of people who have a vision for the business corporately and creatively.
Have an exit plan
Building a business takes time, but make sure your vision includes a route to exit. An institutional investor definitely needs to be able to see how and when they can get their money out. At Edge we look at a 4 to 6 year horizon to build the business and generate a sufficient return to be able to exit.