How can a startup know when it’s ready for investment?
It’s the million dollar question. You have a great commercial idea and have sculpted a captivating business plan, is it now time to find that generous investor who can make your startup dream a reality?
Or do you wait? Should you keep developing your proposition, striving towards those invaluable first sales?
Applications are now open for Future Worlds Dragons’ Den 2018, the University of Southampton’s annual live pitching event that has seen over £250,000 committed to rising student startups in just three years. Could this be the year that you present your bold business plan to the Future Worlds dragon investors?
Future Worlds mentors share a great amount of experience when it comes to judging whether a startup is investment-ready.
“You’re only ready for investment at the point where you write a list of all the things you can do after money and there aren’t any of them that you can do right now,” RPD International’s Josh Valman explains.
“You’re ready for investment when you’re struggling to meet the objectives you’ve set yourself,” Salesforce’s Muj Choudhury continues. “Those can be engineering objectives, sales objectives or simply trying to get that first customer. When you’re struggling it is usually because there’s one or two people trying to do everything. You need to start thinking about hiring but people are the most expensive aspect of any startup. You need to pay them and you need money to do that.”
“It’s a difficult question,” engineering consultant Vincent Mifsud muses. “You need to make sure that you understand the market, understand the differentiators that your idea presents to the end user and understand where the money is. The truism is real that you must follow the money.”
One measure of the need for immediate investment is to evaluate what added value the extra resources could deliver in your startup plan.
“I think you’re ready for investment when you feel that money is holding you back,” Indigo& co-founder Michael Gifford says. “Could you do more, faster, quicker and better with more money? You shouldn’t be looking for money just for the sake of investment – it’s about when it’s holding you up.”
Startup adviser Gordon Clyne encourages entrepreneurs to draw upon the wisdom of more experienced businesspeople to pose the right questions before surrendering a portion of the future business.
“I think you have to answer an awful lot of questions and some of the Future Worlds mentors can help you ask these of yourselves,” he says. “These are questions like ‘Have I got a business plan?’ ‘How am I going to make money out of it?’ ‘What’s the worst thing that could happen?’ ‘Have I planned for disaster while also expecting success?’ There are a bunch of questions that might not be intuitive but they need to be asked.”
Seeking Future Worlds mentors’ advice can also help entrepreneurs plot the scheduling of different startup stages as no two business journeys are completely alike. “How to know you’re ready for investment… well how long is a piece of string? There’s no right answer, it’s different for every single person,” Growth Shack founder Ben Clark explains.
For all the complex judgments that surround plotting a startup’s trajectory, knowing when you’re ready to pitch to investors can actually be kept nice and simple according to KEM Investments’ Duncan Stirling. “Entrepreneurs are ready when they have an idea and a proposition that can persuade an investor to part with their money,” he says.
Six University startups will hope to do just that at The Cube on Saturday 12th May. Future Worlds Dragons’ Den offers the exciting opportunity to pitch for investment in front of a live audience and is open to all students at the University of Southampton. Visit our Engage section to find out more and complete your application before midnight on Wednesday 7th March.