5 Strategies For Attracting Investors To Your Business

Last updated: 15 October 2020

Estimated reading time: 5 minutes

Entrepreneurs and start-ups on the lookout for venture capital opportunities or when building up to the perfect pitch will undoubtedly be tirelessly working on making their business, not just a viable option for investors, but an attractive one that will yield substantial returns. But attracting investors to your business isn’t always straightforward. What can you consistently work on that will benefit your business and make it stand out to investors? And what will make them want to invest their time, money, and energy in it? Here, we highlight five strategies for attracting investors to your business that, once ticked off your list, will benefit both you and your investors in the long run.

Jump to:

  1. Have a standout USP
  2. Sell that USP
  3. Build a stellar team
  4. Demonstrate admirable corporate social responsibility
  5. Offer an attractive stake in your business

Have a standout USP

If your business is offering a product or service with a proven unique selling proposition (USP), investors will be attracted to it like bees to pollen. It doesn’t matter how big or small the scale of your USP is, whether you’ve patented an instantaneous, cheap Covid-19 test or own the only organic, refill food store in Nottinghamshire, if you can prove demand and profit (or potential profit) you should be able to persuade an investor to back you. A history of successful products and/or services and a few business awards will help boost your credibility here too.

Sell that USP

It’s no good just having a fantastic USP. You and your team must also be able to explain what it is in a few sentences in a manner that gets everyone who hears about it excited about it. If you and the rest of your team are constantly and effectively selling your USP, you will create a buzz about what you’re doing wherever you go. Not only will this make it easier for you to find investors, investors may even approach you before you’re ready to approach them. This is because others in your industry will be talking about what you are doing and the media may even pick up on it without you having to go to the expense of hiring a PR or marketing firm.

Build a stellar team

Maybe you’re selling a Software as a Service (SaaS) product to the FinTech sector and you have one of the UK’s, or even the world’s, leading FinTech SaaS experts on your team, or perhaps you’ve enticed someone who was previously on the board of a household name such as Tesco to work with you. Potential investors will clock this and put you on their radars.

Having a team that includes well-respected experts is a smart way of attracting investors and may stand you a better chance of getting funded. If you can show that they are committed to working with your business for at least the next few years, and that the whole management team will be easy for outside investors to work with – that will win you favour too.

Demonstrate admirable corporate social responsibility

Increasingly, investors are looking to invest their money, time and effort into companies that demonstrate that they take their corporate social responsibility seriously. And demonstrate is the defining word here. You can’t just say that you are focusing on being a sustainable and responsible business, you need to provide evidence that you are.

This means, for example, proving that you are taking steps to create a diverse workforce; that you’re constantly auditing your business processes to minimise their effects on the environment and make them more sustainable; that you’re creating jobs for the local economy and that you’re working to support the local community and charitable causes. Evidence of targets that you have set and are reaching, and meeting will help to demonstrate your commitment here.

The more examples of your corporate social responsibility in action that you can show to investors the better. Some investors will only now invest in businesses with ethics that match their own.

If you have not focused on corporate social responsibility in the past, own up to it. If you try and hide it, it will surface in any due diligence investors carry out. Acknowledge your mistakes and then explain how far you are going to fix them and make admirable corporate social responsibility an integral part of your business model from now on. Read our guide on why corporate social responsibility matters for your business and take the extra steps you need to attract investors.

Offer an attractive stake in your business

Investors put time, money, and effort into a business because they want to see a good return on that investment. If you’re seeking hundreds of thousands of pounds of investment in return for a minuscule stake in your company, the investor will likely retreat on the basis that there’s really not much in it for them. You need to be prepared to give investors a decent stake in your business, so that hopefully when they are ready to exit, typically after between four and seven years, they get back a sizeable amount more than what they put in.

If you have taken on significant debt to grow your business, investors may expect a larger stake in it because the risk may be perceived as slightly higher, but most businesses have some form of debt, so providing it is well managed, it won’t put them off investing.

And it’s not just money you can ask for in return for a stake in your company. You can also ask to benefit from your investor’s skillset and time. Perhaps they are a marketing expert, a sales genius, a financial mastermind, or a combination of all of this and more. Ask them for support in their own areas of expertise so that you can apply this to your business to maximise its potential.

Once you’ve successfully got the right individual interested in investing in your business, make sure that you are clear about what each side is getting from the investment. Don’t sign any terms sheets or investment agreements before consulting your corporate solicitor. By having the right legal support in place ahead of reaching an investment agreement, you can be confident that the terms will benefit both your investor and your business.

What next?

If you need legal support in relation to the investment process and drawing up the necessary agreements, our specialist corporate team can help. Contact us today on 0800 689 1700, email us at enquiries@hjsolicitors.co.uk, or fill out our contact form and we’ll get back to you within 24 hours.

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