#28 Doing a Deal With an Investor

So, you’ve approached an investor and after some talks, it is finally ready to seal the deal. In today’s episode of How To Raise Money Podcast, Ray lays out 10 essential items you need to look into when arranging a deal with your investor. There are things that could slow down the deal and you don’t want that to happen. Discover how these will help you not just speed up the deal but also go through the deal smoothly and trouble-free. If done properly, you can ensure that you’ll be raising money for your business in no time. KEY TAKEAWAYS Due Diligence. What slows it down is not having anything available and what speeds it up is having everything available and accessible. To speed up information, create a data room where you could check the activities of the users. Properly name files. Market Research. Create a properly named file with the current date for the investor to be easily understood. Avoid the mistake called ‘Chinese hat theory.’ Chinese hat theory – There are 7 Billion people on the planet, you’ve worked out that 1 Billion wear a hat on a daily basis, so you decided to sell hats since a portion could buy your hat, you're going to make money. This is wrong. Competitor Analysis. Identify your competitors locally and even globally. What makes you different? Why does every competitor copy you? Show your investor how and why you stand out the most among your competitors. Management Team. Know and trust your team. Be brutally honest with them. Though there are many external happenings that will affect your business – Brexit, elections, etc. – you have to have to have a plan in place for the future. Make financial assumptions. Put in best-case and worst-case scenarios. You want to value it as high as you can but investors would look at it differently. To speed things up, ask around how private investors value company in your area and prepare arguments to get the value you’re aiming for. How is it going to be run? You have to be clear who’s going to run it after the investment. Is it just the money or is it more than that you’ll get from the investor? Good Leaver, Bad Leaver. There might be a disconnect between what the investor wants and what you want. The investor might leverage his money to play a big part in the decision-making even though you already have the vision in place. Look at long-term objectives. Negotiating the exact terms of the deal. Negotiate head of terms in conjunction with the solicitor. It will be easier, cheaper, and better for everyone. Find out early as much as possible what the investor wants. Warranties & Indemnities. This is what the investor is looking for firsthand to protect his investment. Be careful about how you structure these. BEST MOMENTS “You need to put down your best calculations as to where you think the business is going to go and what you think is going to drive you forward.” “The rule of thumb: for every pound you spend, you want to increase the value by 3pounds.” ABOUT THE HOST Ray McLennan is a keynote public speaker and former corporate solicitor who has many years of experience owning and operating a variety of businesses in the UK and Ireland. Ray is the Regional Manager for Scotland & Ireland for Angels Den, which has over 13,500 high net worth Angel investors that help to find funding for property and SME businesses. Ray also helped to create Property Angels Den (PAD) in Sept 2014, which matches High Net Worth Investors with property proposals of all sizes. PAD now meets regularly and has funded dozens of property projects all over the UK. CONTACT METHOD [email protected] nigeltbest.com www.howtoraisemoney.co.uk