The simple answer to what investors look for is “the highest return possible for the least amount of risk”. We all get that. But what are investors really looking for in your business? The answer to this is as individual, diverse and complex as you can imagine, however we can break this down into some manageable insights.

Risk Return

Although risk return as posed by our question is the simple answer, we must deal with this upfront. Naturally, investors are seeking the highest return possible for the least amount of risk. The wide range of investors that we deal with on your behalf, all have different profiles, are sophisticated investors and are experienced in assessing their risks as a trade-off for returns. Your role is to clearly “demonstrate and validate” the opportunity for profitable growth and how you have planned to de-risk the overall strategy. The key areas in demonstrating and validating your value proposition is best achieved by breaking down every key functional element of your business such as:

• Marketing: can you demonstrate and validate that you have a scalable marketing system? Has this been constructed on the back of a highly systemised process? In other words, you know the profile and persona of your target market, you know what problem your market has and how you solve that for them; and you know the “process” of finding, attracting and engaging your ideal clients
• Sales: from proving that you know how to attract and engage with your target client, you have also built a scalable sales process. You know how to nurture the target market and have built models that result in high conversion rates from engagement to contracting
• Operations/Production: the product or service that you offer, the solution to the problem that your target market has, is also scalable. You can demonstrate the metrics of how the operations/production area can grow in line with demand and how your margins can be maintained as growth expands. In other words, you can validate that you know how to grow the business without compromising the customer experience
• Finance: nothing gives our investors more confidence than to see that a potential investment opportunity is being entrusted to an organisation that knows their maths. Your financial modelling is aligned with your plan and all elements of the business; marketing, sales, operations etc. and growth factors have been taken into account. Remember, these are sophisticated investors and they have seen it all before. Be conservative in your financial forecasts while ensuring that all expected ongoing investment in your business and product have been accounted for
• Human Resources: by foreseeing your growth path and outlining a plan of how your business will grow usually results in a need and an opportunity to identify the skills and resources that you will need to bring into the organisation and/or know where and how to outsource. Validating the team that you have now; qualifying how that team is more than competent in managing the business growth is vital, but then also being realistic about the sophistication of your team as growth compounds provides confidence that you have a strong handle on the future needs of the organisation
• Management: not one single investor is likely to entrust their hard earned dollars in your business without validating that those who are responsible for the “use of funds” are competent in managing to a plan. Your ability to demonstrate that you have strong governance and reporting in place becomes fundamental to building this confidence in your management skills. KPI Dashboards, clearly articulating the “use of funds”, divisional reporting and authorisation systems all play a big part in showing an investor that you have strong processes in place to manage their investment dollars

One strong message that we hope you have picked up on is the word “scalable”. A key element that sophisticated investors are looking for in all aspects of your business is your ability to scale to growth. They do not see their investment dollars as a learning tool for you to play with. There is a strong expectation that with the injection of their funds into your business, that you are ready to grow and scale up quickly. The result of this is that from the investors perspective, returns are likely to be higher and risk is mitigated. Which comes back to our simple answer that investors are looking for the highest returns at the lowest risk ………………… can you validate that position?