Chris Smith, Managing Partner of Playfair Capital on how entrepreneurs can increase their chances of getting investment

Chris Smith Playfair Capital

Raising capital for your business has got to be one of the most soul-destroying things anyone can ever do.

Unless of course, your parents lend you the money or a rich uncle dies.

But it’s an important process to go through even if you fail miserably.  My business, in particular, is very different from where it started. Mainly because of the constant rejection from people who know a lot more about business than me. The main criticism being, too niche or too much competition in the comparison space.

So over the last few years, we’ve positioned the business to be what we think is the best guide and comparison site for products that can potentially make you money, whilst all the rest concentrate on saving you money.

After all, it’s hard enough to make money taking high-risks, without your broker ripping you off too.

Maybe one day, we’ll sell it for a decent chunk of change to another comparison group looking to move into the investment space. But until some angel investor wants to risk losing all their money for the chance at 10x back invests we’ll continue to grow organically.

So, what can you do to increase your chances of getting investment from an Angel Investor or VC?

Obviously I don’t know because I haven’t. But I know a man who does.

Here, Chris Smith managing partner of Playfair Capital tells entrepreneurs how they can increase their chances of getting investment from a VC or angel investor:

What’s the best way for an entrepreneur to approach angel investors?

There are a few steps that I’d take.

First, figure out which individual angels, angel syndicates/groups, accelerators and VCs are interested in your space (this is critical as you need to find people who are intrinsically interested in what you are doing).

Second, make a plan to approach them – like any good sales campaign, you’ll have a mix of approaches, including attending events, getting warm introductions, targeted cold outreach, etc.

Third, make sure you have perfected your 60 second elevator pitch so you can grab people’s attention when you do get in front of them.

And what should they definitely not be doing?

Targeting the wrong investors – if you have a B2B SaaS business, you’re not going to get any traction trying to engage with investors who like building consumer brands.

Anecdotally, what’s been the best thing you’ve seen in a pitch deck?

I couldn’t pick one thing out – I’m a sucker for beautiful design though; it makes a good first impression, allowing your deck to stand out from the noise, and makes me want to read what you have to say. It also speaks volumes about your approach to business and how well you execute.

And what about what always puts you off the most?

Too long (10-12 slides max), too wordy (use visuals), doesn’t explain what the business does (you need to convey this is a sentence or two), ugly (your deck is such an important document it needs to look beautiful), basic mistakes (typos can cost you a first meeting). 

How much do you think entrepreneurs should focus on the exit when looking for investment? Do you think there is an inherent conflict in trying to grow a business whilst at the same time wanting to sell it?

I don’t think they should be focusing on an exit, but rather on how to build a really big business. As investors, we don’t expect a founder to know how or when an exit is going to happen, but we do expect them to have done the work to figure out that it is possible to grow a large enough business to generate venture level returns (50-100x). I don’t see a conflict in wanting to build a business and then realise a return from it, but founders must ensure their aspirations align with their investors.

What should entrepreneurs look out for to make sure they don’t get shafted when raising money from an angel or VC?

Avoid any kind of preference share or unusual financing instrument – at seed, everybody should be in the same class of ordinary shares to ensure alignment of interests. Don’t pay fees to anybody investing in your company, unless they are bringing enough value to justify them (you should absolutely avoid any monitoring/ongoing fees). Get a decent lawyer who is familiar with doing these types of deals to advise you – make sure you take references before instructing anybody.

Do you think it’s worth listing on sites like Angel Investment Network, Venture Giant and equity crowdfunding sites?

It depends. The angel sites can be good to get maximum reach for your company and might be especially useful if you don’t already have an established network. Crowdfunding can be a great way to raise funds for companies that have a strong brand and loyal customers (usually with a consumer focus).

What do you make of equity crowdfunding sites? Are they the future of angel investing or are they going to end in tears?

My colleague Henrik wrote an excellent blog post on the topic of crowdfunding vs VC.  My view is that they are an important and valuable part of the ecosystem, but no threat to traditional angel investing. Angels bring expertise, experience and network that equity crowdfunding doesn’t.

At what point do you think entrepreneurs should give up looking for investment and get a job?

The choice isn’t binary. Can you build your business without investment would be the first question I’d ask? Not every company needs external capital. I’d also be sure to get as much feedback as possible from investors, potential customers and anybody who’ll listen – what do they like/don’t they like about my proposition and how can I iterate it to something people will buy.

It’s worth saying that building a company is an incredibly hard thing to do so I’d be periodically reviewing whether it’s likely to be worth the sacrifice and makes financial sense.

If you could invest in your dream business what would it be?

I already get to do this at Playfair!

And finally, what are your top three resources that you think are really helpful for entrepreneurs looking for angel investment? 

We try to make the Playfair Blog useful for founders and there are several posts on there about how to approach investors and how to nail the first meeting (we’re constantly adding more content).

Otherwise I find the team at Startup Grind really helpful, so it’d be worth engaging with them, the UKBAA is a fantastic champion of the angel community in the UK and very supportive to founders, and I enjoy listening to the Invested Investor podcast run by Peter and Alan Cowley.

Chris Smith is Managing Partner of Playfair Capital

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