7 Things Your Business Needs to Do Before Pitching PE Firms
Your early-stage enterprise is gaining momentum by the day, and you’re already thinking ahead to the inevitable. You’ll reach the end of your bootstrap sooner or later (probably sooner) and when you do, you’ll need to seek outside funding.
You’re already putting together a mental list of investors who’d be a good fit for your company. You’re doing an inordinate amount of research, trawling Crunchbase, AngelList, LinkedIn, and personal or company websites for any insights you can glean. (Don’t knock this strategy: OpenGate Capital founder and CEO Andrew Nikou’s personal website goes beyond Nikou’s CV, for example, hinting at the sorts of opportunities he’s likely to pursue. Information like this is valuable for founders.)
But deep down, you know you’re getting ahead of yourself. There’s work to be done before the pitching begins. Here’s what your business needs to do before making first contact with potential investors.
1. Create a Formal Legal Presence for Your Business
Let’s be honest. Creating an LLC or limited partnership for your enterprise should have been among the first things you did after your a-ha moment. And you surely don’t need the benefits of getting legal spelled out.
Yet you’d be surprised how many founders put off this step, even after they enter the market and start earning real revenue. The good news is, it’s never too late to get it done.
2. Get the Regulatory Ball Rolling
If your enterprise operates or plans to operate in a highly regulated industry, you’ll need to lay whatever compliance foundation is necessary to remain on the right side of the law. In the fintech space, for instance, you’ll need to mind PCI security standards; in healthcare, HIPAA; and so on. If you need to apply for regulatory approval in the jurisdictions where you plan to do business, now’s the time.
3. Validate Your Solution
Yes, you can pitch investors pre-revenue. But that’s not ideal. To increase your chances of landing game-changing funding, you need to market-test and validate your solution. The goal here is real revenue — not profitability, but real revenue (and real revenue growth).
4. Create a Compelling and Well-Ordered Web Presence
Your solution might not need a professional-grade web presence to get through the validation phase. That might not be necessary at all, if you’re lucky (and able to scale using organic social media and word of mouth alone).
You can bet your investors will want to see a legit-looking website and paid marketing strategy before they commit, though. Indulge them, even if you don’t feel great about it.
5. Grow Your Executive Team
As important as you are to your company’s future, you know you’re not the only person holding it together. (And if you are, that needs to change, fast.)
Prospective investors want to know that it’s not just you in charge too. So, before you reach out to potential backers, put together an executive team that inspires confidence. Even if this team is the sum total of your company’s staff when you walk in the room, you can’t underestimate the importance of distributing personnel risk.
6. Recruit Advisors (And Make Their Association Public)
Unless you’re a seasoned founder, you’ll want to have well-known (or at least well-accomplished) advisors in your corner as well. This is arguably even more important for investor confidence than a well-rounded executive team.
Don’t go overboard or let this piece of the puzzle hold you back. You don’t need celebrity advisors to make an impact in investor meetings (though that doesn’t hurt). You just need people who know more than you to publicly validate your idea and commit to helping you execute it.
7. Put Together a Compelling Pitch
You’re almost there. It’s time to put together a compelling pitch that puts the best possible spin on your solution (and your enterprise).
To do this right, you’ll need to know your audience — what they want to hear and what they definitely don’t. You’ll need a compelling value proposition. You’ll need to convince potential investors that you want to succeed and, perhaps more importantly, tell them why.
What’s the Rush?
FOMO doesn’t just afflict investors worried they’ll miss out on the next big thing. It’s a corrosive influence among founders too.
Don’t be the entrepreneur who shoots themselves in the foot in a rush to grab funding before they’re really ready. You’ll be in good company if you do, but seriously — don’t. Even in a rapidly evolving space, it’s better to move deliberately. Every contingency you leave unexamined is a threat — possibly fatal — to your enterprise.