There comes a time in the life cycle of many technology businesses when those in charge, whether they call themselves the owner, CEO or Managing Director, might actively consider the pros and the cons of seeking outside investment opportunities.
It is a big decision. After all, if a business has been successful enough to grow organically, it will likely be a huge wrench to invite an “outsider” to own part of the business in return for capital investment, even though it might be actively needed to provide the boost needed to take it to the next level of an ambitious growth plan.
However, once the strategy of seeking outside investment has been agreed upon by those running the business, it will be time for them to showcase their business in all its glory. After all, no one can expect a potential investor to hand over capital without carrying out some thorough research.
Let’s look at some of the top factors a technology investor will look for when carrying out their research. In reality, the list will go on and on, especially as every investor is sure to be looking for specific things. However, the following are arguably the top five things that all investors will have at the top of their due-diligence checklists.
Arguably, for most investors, this is the single most important factor.
A technology investor will want to work with a business whose leaders know their numbers. Furthermore, these numbers should be presented in a clear, concise, and straightforward manner, highlighting vital sections such as profit and loss, cost of operations, etc.
If a company is performing well, this should be highlighted. And likewise, if there are any problems, these too should be highlighted at the outset. An investor will often be savvy enough to realise that any short-term issues can be resolved as part of a bigger-picture business plan, and it will be far safer to highlight these issues at the start rather than attempt to keep them swept under the carpet.
2. Background and experience.
The management team of a business sit in its driving seat. Therefore, an investor will want to see they are experienced enough to not only make a business succeed in the next few months but also in the next few years.
The management team of a business can do a lot to help themselves before inviting outside investment opportunities. They should ensure their online profiles, such as LinkedIn, are accurate and up to date. They should also ensure any other platforms follow suit, such as their company biographies on the website. Make no mistake about it, just as a business will be researched by a potential investor, so will the management team.
3. The company and its products.
We are in a technology-driven world. We are on the cusp of Industry 4.0. and artificial intelligence, robotics and cloud-based platforms are all around us. While this makes for many opportunities, it also means there is a lot of competition.
Potential investors will want to clearly understand what it is your company does, who buys from it, or uses it, and what it can offer that its competitors cannot. Make sure you are ready to describe, in detail, aspects such as intellectual property protection, exclusive licenses and exclusive marketing and distribution relationships that might be in place.
4. A detailed business plan.
Once the basics of a company, its finances and its balance sheet are understood, most investors will move on to the business plan.
What lies ahead for the next six months, one year, five years and beyond? How are you going to source more customers? What amendments will be needed to ensure your product remains competitive? This is vital for investors to know. Do not concentrate on the present and forget to address the future when it comes to showcasing any technology business – if you do, investors are likely to walk away.
5. Target markets.
The management of a technology company will need to ensure they can describe their target market effectively to any proposed investor.
Investors will look for growth opportunities. Importantly, this doesn’t always mean taking over the world. If a product is a niche, it might be modest growth, but growth which penetrates the absolute core markets.