PUBLISHED ON 6 January 2020

About the author

• £15 m+ revenue business founder
• Angel investor in over 25 Scottish tech start-ups with several successful exits to date
• Reviewed countless pitch decks, business plans and witnessed what constitutes a winning team

Summary – Key Points to Note

• The team must have an advanced degree of product/service development and early hint at market fit through some sales traction.
• Investors will be looking for high-growth potential with global markets factored into the development plan.
• Subject matter/domain expertise across all team members is essential.
• Looking to raise 6-7 figure monies – investors like ambitious teams with a passion to deliver.
• The team needs to have a good feel for who might want to buy them and how to build acquirer value over time.

What are investors looking for?

Confidence

A team that breeds enthusiasm for an “outperform” on exit. Given that start-ups have a c50% attrition rate, and most others will exit at 2-3x money, investors are always on the look-out for the team that might balance or boost their portfolio with an 8-10x return. That adds a little pressure and focus to your first investor pitches!

Single-minded

The team needs to be united in its mission, with clarity and focus. Does the founding team fully align with each other on the path ahead and have they determined their strategy & tactics? Have they agreed their specific roles and got a fix on demarcation? What about the team strengths and weaknesses?

We have a superb start-up eco-system here in Scotland but that can divert or distract in equal measure. You could go to an event every night these days, pitching your wares and networking over a beer or wine. However, the reality for successful teams will more likely entail long sessions at the office, evening laptop time and intrusion into weekends and family time.

Transparency

Investors know there are major ups and downs ahead for start-ups. What they don’t like are surprises; big holes in the projected monthly recurring revenues or those fabled £1 million deals all falling through at the 11th hour. Adding in things like late cash calls requiring swift investment rounds are never good, and from there the founding team can be on the back foot.

Sales

For too many people “sales” is a dirty word. No matter how cute your tech, or swanky service solution, at some point you’re going to need real structure and flair in bringing products to market with those crucial first reference accounts.

Is that sales ability embedded in the team and if not, do they quickly recognise the need to scale-up across the commercial function? Does the strategic business plan have a strong sales execution plan in place, in detail and with all the usual KPI’s and stage-gates noted?

Nimble

Many start-ups need to pivot on their core technology and market fit, as customers direct you off at tangents and markets demand tweaks to the offering.

Are you adroit enough to catch the buying signals and change your ways or do you remain stubborn and wedded to your initial proposition?

There is no sure-fire answer, but the team must be prepared to soak up market feedback, debate internally and arrive or remain at what appears to be the best course of action.

Resilient

Building a start-up is tough. It requires enormous graft over long, often stressful hours with probably more lows than highs as you’re finding your way through numerous challenges.

Does the team protect and support each other and recognise when to sit back and let off some steam? Have they all appreciated that they may not all make the journey? Some might need to step back, take new roles or cede space and equity, to new members of the leadership team as their start-up scales and matures?

Many of the CEO or CTO roles we take on arise due to matters of leadership quality and style. Have the founders considered how they need to learn and grow as the business develops? There will also be times when a certain toughness might be required to push back on investors, whether that be on strategy, tactics, valuations or exit planning.

Sharing

Many investors will want to see the spoils of an exit shared with the team that has been around throughout the journey. The founding team must be prepared to dilute their initial equity stakes to create a pool of zero-cost and tax-efficient share options to recruit, motivate and retain the best talent required to deliver the exit.

Recruiters

Okay, a shameful plug here for my industry: in every investment pitch you will find a crucial element is a constant – talent. Real talent is scarce at all levels and the founders must quickly craft a talent engagement plan and be expert in acquiring and developing staff. Investors need to know you have a plan for this and can build a cohesive team to outperform all competitors. In these talent-starved times many exits are as much a talent acquisition play as an intellectual property grab.