Burning issue: Access to funding

May 1, 2019

What is the key question investors will ask an entrepreneur/business owner seeking funding – and whats the best way to answer?

Alastair Smith
Portfolio manager, North East Fund

The key question will depend on the stage which the business or entrepreneur is at – whether established and aiming to grow, or starting from scratch for the first time. But, before backing an entrepreneur or management team, all investors will try to gauge whether they have the determination and commitment is necessary to make any business a success.

Entrepreneurs and innovators can naturally focus on their products or inventions. When answering questions from investors, they should also ensure they can demonstrate genuine market demand for the product or service and that it can be sold profitably – sooner or later (preferably sooner). Not many investors will back a loss-making business in the hope that it turns into a unicorn.

Colin Bell
Business growth director, North East LEP

The key thing that any funder will want to know is what makes you competitive. Entrepreneurs need to develop a value proposition that is truly different and better than what’s in the marketplace. Those seeking funding must show that they are business savvy, understand business models and have a creative and innovative strategy, as well as the necessary action mechanisms to deliver the plan. Most crucial of all is an appreciation of the numbers. A business plan must capture minds as well as hearts, so make sure your numbers stack up or the plan will be discredited.

Joanne Whitfield
Fund manager, FW Capital

FW Capital provides finance to business in the North of England. The first thing we look for is strength and depth in a management team and ambition to succeed. We want to know about capability and commitment to the business, what motivates them and how they work together as a team. This demonstrates to us how well placed they are to deliver the business plan presented and how resilient they are if things don’t go to plan. Ultimately, we want to invest in people who are passionate about what they do, wholly committed and are prepared to work in partnership to deliver their ambitions and ours as the investor.

Simon Green
CEO, Innovation SuperNetwork

The top question for investors will always be whether they believe in the capability and commitment of the management team. A good idea, in the hands of an average team, will likely fail while a good team can refine an average idea to make it successful. Investors may test the capability of the team in different ways but one way is to ask whether there is a good understanding of the risks facing the business. A good team will have honestly assessed risks and built in the flexibility to deal with these risks. Think through possible scenarios and risks in advance so that you can quickly and efficiently respond to an investor’s questions.

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