Seeing stock markets tumble and the promise of a global financial crash on the horizon, it’s understandable to fear the worst for you and your business.
Having spent the last few days talking to investors, advisors and associates weve formed the following conclusion: for entrepreneurs seeking investment, it’s business as usual.
1. History has a habit of repeating itself.
During the 2008 crash and the following years, capital was withdrawn from the volatile stock and property markets. With bank interest rates so low this left just one source for growing wealth: Entrepreneurs. These entrepreneurs had ideas such as Airbnb, Uber and Stripe. In the UK, companies such as Zoopla and BrewDog were founded during the crisis. They received major investment and thrived in uncertain times. There’s little reason to believe the same won’t be true this time around.
2. Investors still have funds they need to deploy.
Sitting on these funds is not going to protect their wealth during a recession. Investors are still keen to deploy these into strategic investments: Entrepreneurs with a business model that can thrive in the current climate. We’ve spoken to founders who despite the chaos have closed their investment rounds this week.
3. There’s a massive opportunity for entrepreneurs.
As large corporate firms scramble around trying to shore up their core business; new ventures, non-critical business and corporate innovation will be left behind and forgotten about. This provides entrepreneurs with opportunities to provide new and innovative products and services that replace and improve on what was being offered, scooping up the clients left behind. Not only this, the nature of coronavirus means corporates have a whole new set of problems that need solving. The way we work is changing. Investors know this too. They’re looking to back founders who demonstrate they can capitalise on this trend now and in the longer term.
There are, however, going to be some changes to the investment landscape, for which founders need to be aware. When you understand these changes, you are given an advantage against your competition and will find your ability to raise investment increase.
Here’s our predictions:
1. Many amateur and hobbyist investors will decide to sit on their capital. However, the capital they invest will be replaced by those who’ve drawn funds from the stock and property markets.
2. These investors are less experienced in investing in entrepreneurs. They’ll be slightly more cautious and expect founders to deliver more detail than perhaps they’ve needed to in the past few years.
3. We’ve seen a rise in the percentage of rounds completed via crowdfunding in recent years. Institutional and professional Angel Investment will begin to catch up and enjoy a larger share over the next few years.
4. Overall, investors will be more conservative. They’ll need to see more detail and more evidence than they have before to make a decision. It won’t be more difficult, you’ll just need to work smarter.
5. Verticals like BioTech, HealthTech and MedTech will be much more popular. As will B2B tech that supports communications and events (such as VR/AR-enabled solutions). Retail and hospitality sectors will struggle.
To capitalise on these opportunities and adapt to these changes, it’s going to be more important than ever to ensure ALL your critical fundraising assets are in place before you raise funds.
- Your business plan will need to be realistic, credible and consistent. It must be easy to digest and demonstrate a clear strategy.
- Your financial projections will need to demonstrate you understand the current financial risks and the potential rewards on offer.
- Your pitch will need to provide a credible and compelling argument that you have the business model and the vision to not only navigate these times but thrive in them.
Once, and only once, you have these three assets in place – your pitch, your financial projections and your business plan – will you be seen as investable in the eyes of investors.
These three critical fundraising assets will be the key to becoming an investable entrepreneur in the months and years ahead.
They’ll allow you to demonstrate that you’re in a position to take advantage of the new and existing capital available and have a plan that will ensure you thrive in the uncertain times ahead.