The Quick and Dirty Guide to Wooing an International Investor
You're a business owner with a great product who wants to expand overseas, or an entrepreneur with an idea that will change the world. Perhaps you want to manufacture bricks out of sand, or export your organic eggs to China or create water-purification techniques to provide clean water in remote locations.
You've boot-strapped your project with your own funds for the last four years, and begged and borrowed from friends and family, but you've only raised a fraction of the capital that you need to realise your vision. You're not a tech outfit, so none of the domestic banks will loan you any money and you can't access a grant from government.
A colleague has suggested that you seek investment from a cashed-up international investor, and it sounds like a good idea, but where to start? Here's the quick and dirty guide to getting an international investor interested in your project. You'll need:
A project which appeals to potential investors
It sounds very basic, but having a project which is appeals is key to piquing the interest of a potential investor. There's not much point in pitching a fin-tech project which needs $2 million in quick funding to a sovereign wealth fund that is looking for investments in the resources sector of $100 million plus. Nor it is sensible to approach a private investor who is risk-averse and tends to invest $5 million at a time with a request to fund a speculative $50 million mining project which will make a return in seven years time.
So, before you get started, make sure that you know your potential investor. Research them, try to discover what makes them tick, find out what their interests are, what they have invested in previously and what types of projects they might be looking for. If possible, spend time with them.
Strong track record or inspiring vision + sound strategy
While international investors are usually well-funded, entrepreneurs often mistakenly believe that they are hanging around, waiting to hand out cash to folks who show up with good ideas.
Nothing could be further from the truth. International investors are usually:
- Successful business people in their own right, with razor-sharp intuition about which projects are likely to succeed or fail
- Members of wealthy families with staff trained to protect their wealth and make shrewd decisions about what to invest in
- Representatives of private equity firms whose jobs depend on making strong returns on behalf of the firm
- Sovereign wealth funds with strict criteria about the investment classes, risks and returns that they will accept.
If you're going to catch and hold the attention of one of these types you'll need either:
- A strong track record which demonstrates solid performance over several years and indicates that your project is likely to succeed, as long as it secures cash to allow it to expand or,
- An inspiring vision which captures hearts and minds (e.g. mobile water purification units for landlocked African countries), backed up by a well-thought out strategy that outlines how you will realise the vision and in what timeframe.
Simple yet compelling pitch
If you're lucky enough to have a project which speaks for itself or an inspiring idea, the next step is to create a compelling pitch which explains:
- Who you are
- What your company does and what problems you solve for clients
- Why you are different (and superior to) your competitors
- Why you are credible
- What problems your product solves or how your idea will change the world
- What the benefits of your solution are and what ultimate result the end user can expect
- Why you are pursuing the project you are seeking to raise capital for and how it links to your "bigger picture"
- What the opportunity for the investor is
- What the next steps are
- What your vision will look like when it is realised (e.g. clean water for Africa, free wi-fi in every street in Hobart. world peace)
Your pitch needs to be simple enough for a ten-year to understand and for your potential investor to repeat to his mates over a beer (or green tea). And it needs to go for less than five minutes!
Sound financials or realistic projections backed by credible theory
If the potential investor likes your pitch, the next question she'll ask is how viable the project really is. Make sure that you have your financials ready. Ideally this should be at least three years' worth of financials showing a profit and/or growth for an existing project. If your project is still in the conceptual phase, you'll need a three-to-five year financial forecast, backed up with a detailed strategy on how you plan to reach the forecast.
Credible leadership team
While the investor is checking out your financials, he'll also be casting an eye over your leadership team (the board and executive), to make sure that you have joined forces with the kind of people who are likely to be able to realise your vision.
Don't approach a potential investor without a sound leadership team in place. At a minimum, it's a good idea to recruit people with technical expertise in your field, financial know-how and general business acumen. The more you can demonstrate that the leadership team has succeeded in the past, the more convincing you'll look and the more comfortable your investor is likely to be.
If you're looking to set up a project overseas, it's also a good idea to include a person with regional or country-specific expertise in the leadership team.
Cutting edge digital presence
First impressions are important and how you and your outfit show up online is key to winning an investor's initial approval. Having a scrappy web presence or no web presence at all is the digital equivalent of turning up at a meeting with your shirt untucked and dirt under your fingernails... it doesn't set the right tone for a serious commercial conversation and is unlikely to impress.
Sorting out these simple, but key elements in your investment process can mean the difference between getting to first base with an international investor and bombing out altogether, so take the time to get the detail right before you start chatting up new potentials.
Join our webinar on Wednesday 23 November to learn " How to Find an International Investor for your Project Without Getting Burned"