Short, Sweet and Smart: The Essentials of an Investment Application

By Molly Deringer, Entrepreneur Services, Investors’ Circle

Selling your business concept to investors is not simply a matter of solid revenues figures and hockey stick projections. Language and description matter. Your ability to thoughtfully describe the basics of your business will reflect upon your skills and sophistication as an entrepreneur to investors who read your profile.

One of the most important requirements of an application is that it succinctly and thoroughly describes the product or service offered. Although this may seem like a simple task, those who’ve been thinking and talking about their business 24/7 may have trouble describing the basics to an unfamiliar audience.

It’s also important not to underestimate one’s competition or overstate competitive advantages. Do your research before claiming that you’re “the first and only business to combine a green product certification and rating program with retail sales in one online location.” Try to be specific. Your true addressable market is likely smaller than “the LOHAS market” as a whole or simply “women ages 20-50.” If you haven’t conducted market analysis yourself, use available reports from comparable businesses.

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At the risk of stating the obvious, it’s also crucial that you tell investors how your business will make money. Believe it or not, we’ve seen plenty of applications at Investors’ Circle that fail to do just that. Don’t assume that since you’re developing a new technology your

audience will automatically understand that you’ll be licensing it, or conversely manufacturing and selling it. If you’re creating a web application, don’t assume we’ll know your revenues will be based in advertising; Tell us. Similarly, it’s important to make it clear who your direct customers are. If you are in retail, who will be selling your products to the end consumer? If you’re making solar optics, who will purchase or license that technology? The question of who will be putting money in your hands is not always covered in your market section.

In the end, of course, numbers are also important. The amount of money you seek to raise, how you will use that capital, and the reasonableness of your revenue projections will all be evaluated by investors. There is obviously no “right” answer about how much capital you should raise: it should be enough to cover your current growth needs. If you’re seeking capital for a new manufacturing plant that will likely cost $2 million and you’re only raising $500k, investors may be wary. On the other hand, if you’re a pre-revenue company that has not raised prior financing from friends or family or put in money of your own, you might not want to ask for $3 million.  Similarly, be careful not to project excessive first-year revenues. Investors know that growing a business takes time and will fault you if you project a million in revenues in your first year of business. All of this is to say that your projections and the size of your raise all speak to your credibility as an entrepreneur.

Possibly the most important aspect of your business proposal is your management team. Investors need to see not only that your business proposition is smart and viable, but also that you are the right people to pull it off. Ideally, a team should have combined experience in the industry that the company occupies and a proven record of entrepreneurial success. If there are holes in your team, acknowledge them, and try to fill them with advisers that can guide you while your business develops.

When all is said and done, it may feel impossible to describe the essentials of your business in a limited framework. Indeed, it’s a challenge, but trust that thousands of entrepreneurs have accomplished the task before you. Think about what is, indeed essential and what’s merely a colorful detail. Remove language that is vague and replace it with concrete information. Be careful to avoid repetition. Cut out summary statements like “We are committed to scaling a sustainable business by marketing a diverse product line to our loyal customer base” that don’t really add value to your profile.

Finally, we encourage you to visit your application a few separate times, with fresh eyes on each draft. (Note this may require you to begin your application earlier than the last three hours before an application deadline.) We hope than in the end, you’ll find this to be a helpful exercise in brevity and precision.

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One Response

  1. very good insight on how to draft an investment application; I actually am interested to invest in a company with a green initiative and came across e3bank they seem to have a sustainable business model and operate on a triple bottom line you can check them out at http://www.e3bank.com I would love to have you opinion.

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