We truly hate saying NO to great ideas but we seem to spend 95% of our time saying it…..
By The Hons Richard Evans
I’m afraid it is a reality that we turn down most investment deals that come our way, why is that? From UK Property Development and Asset deals to Energy, Technology, Infrastructure that require Equity or Debt investment. Here is my simple advice to companies seeking funding and in turn a reminder to investors seeking opportunities.
Here are some of the most common issues and sheer frustrations we face daily;
- No ‘skin in the game’, lack of the company’s own cash:- investors rightfully do not welcome ‘sweat equity’ and just because the company has experience or access to a project however good. In addition, not having a reasonable balance sheet raises alarm bells immediately and yet so many companies seeking investment do not consider this and can come over incredibly arrogant. If the company does not have reasonable finances the investor has perhaps the right to take the ‘lion share’ which may not work for the firm requiring investment.
- Poor quality proposals, lack of understanding of what is requirement within an Executive Summary/Teaser document for starters, mis-leading information which does not get to the point and explain clearly, no apparent sight of a robust business plan and totally unrealistic valuation of the company despite in some cases a fairly strong management team who no doubt have amazing experience of delivery working for a big conglomerate – but this is a new business and sometimes really doesn’t count. Spelling mistakes, punctuation are common which is concerning. My advice to those companies seeking investment is do not be too vague but at the same time don’t be too detailed and get too technical confusing investors – it is not a good or clever move to aim to baffle investors, we spend too much time asking companies to speak ‘plain English’ and get to the point across avoiding ‘management speak’ where possible. In addition nothing upsets investors more than cosmetic issues such as inconsistent margins, missing page numbers, charts without labels or with incorrect units, tables without headings, technical terminology without clear definitions.
- Contracts that are not worth the paper they are written on in some instances, MOU’s are not contracts and it is easy to source information on the validity of these ‘apparent contracts’ via the internet these days in some instances even sometimes without the employment of a due diligence team.
- The opportunity has been sent to everyone and their mother and is floating around the internet at a rate of knots via various intermediaries acting like ‘monkeys’ sending to huge databases, this is the most frustrating of all as clearly a rifle shot strategy working closely with investors makes far more sense and more professional, some companies aim to convince us that this is near as dammit an ‘exclusive’ but we find out really quickly the project has been offered to what seems hundreds of contacts over a long period of time and therefore weakens the proposition and general appeal – you have to make investors feel special and provide a mandate. It’s a very small world indeed and word gets around quick.
- No planned exit strategy and totally unrealistic budgets; both expenditure and sales. The worst business plans bury assumptions throughout the business plan so no one can tell where the assumptions end and the facts truly begin. Be realistic and conservative, under promise over deliver is my advice to companies seeking funds. If you are building a brand then the likelihood is you have very serious competition, to compete you will need substantial funding to keep competition at bay, most large companies pump Billions in to keeping competition away each year, it’s tough world out, a lions mouth, there so be realistic however good you think your idea is. A classic I have come across a few times are for example Watch companies that wish to take on Swiss companies overnight it seems in view of competing with 150 + years in the market place. The arrogance in place is incredible.
- Magic Pill or ‘one-stop solution’ myth……there no secret to success and no substitute for hard graft, but luck, judgement, brains and being a good person helps. Approach investors with the respect they earnt and are more than due.
- No ‘win win’ situation that benefits both parties, investors have no shortage of ‘opportunities’ so make it win for them also. Aim to get your proposals close to the top of the pile not the bottom sitting there simply stagnating.
- Don’t turn down consideration for paying a reasonable monthly retainer to the company you have mandated to raise investment adding significant value, with the right company this can be worth its weight in gold. It creates focus, pressure and serious commitment on both sides.
The internet has its benefits by far, and although we all aim to surround ourselves by the best quality people we can meet. The significant downside of the internet is that we are all targeted and receive poor quality opportunities on a daily if not hourly basis. We have experienced these past few years that it is all down to quality of deal-flow carrying out due diligence to the best of our ability and whilst we are surrounded by investors we are often too concerned to take opportunities that don’t stack up and could ultimately ruin our reputation overnight. For the right projects money is not always difficult to find, as high level introducers we don’t advise we simply connect however those requiring funding must consider the investors have an abundance of opportunities coming their way every day and the companies proposal needs to clearly stand out from the rest, it is worth putting the time in themselves or outsourcing to a professional reputable company and indeed not just the detail but paying a creative designer to make the documents looking tip top and impressive catching the investors eye. I’ve listed just some points albeit not comprehensive or academic by any means.
There are many hidden gems in investment terms out there which makes this business incredibly exciting, being a significant part of a dream can be an honour but at the same time our reputation can be at stake with our investors at any time, money isn’t everything for sure but reputation and good standing within the world is. My personal opinion has always been I would rather ‘not’ do a deal than do a bad deal, it takes 20+ years to build a good name and seconds to ruin it.
The Hons Richard Evans
Richard has been a highly motivated professional networker, dealmaker for over 25 years. Since his teens he has built up strong business relationship skills including selling, marketing, branding and lead generation. At Centurion Press Group (1990–2003) as Shareholder and Board Director he founded the Voluntary Sector Services Division. His charity fundraising and marketing skills proved to be both transferable and highly relevant to the world of corporate governance moving forwards. He initiated Nelson Mandela’s trip to the UK in the early 1990’s and has invested in several diverse businesses including fashion, technology, and property development. His personal database consists of circa 6,000 connections including investors and businesses worldwide. He has over 17,000 connections on LinkedIn including Property Developers, Construction Companies, UHNW’s, Corporations, Charities, Government and Consultants. Richard prides himself on being ethical, honest, with a very strong work ethic.
Centurion Press sold to a PLC in 2002 for £42 million, consisting of 4 Directors including Richard’s father Lord David Evans the original founder. Richard also introduced Centurion to KISSFM in 1990 (28 years ago) who invested £200,000 with a return of £2.4m in just 18 months exiting the business successfully. He now runs businesses; including ACE Funding Ltd which is a high-level introduction service connecting established UK Property Developers to investors, and in some cases land via Local Authorities and Housing Associations, specialising in the ‘Build to Rent’ sector incorporating mix-use development schemes. In addition, he operates a new business Balmoral Global Capital supporting projects, funds & business entrepreneurs, obtain finance working with suited investors including Investment Funds, Single and Multi-Family office and UHNW’s typically $20m and above in investment.
Richard has raised over $800m during the past few years. More recently Richard founded www.lithuaniagb.com which has access to high quality Lithuanian supply chain including bringing Off-Site construction to the UK working in collaboration with Tier 1-3 UK construction contractors, hotel owners, student accommodation, private rental sector, investors, again with local authorities, housing associations etc. Bringing worldwide clients and skill sets to together, supported by the Government of Lithuania. This has now expanded to the whole of the Baltics which includes Estonia and Latvia as the UK cannot quote with the capacity needed to hit government targets to build 1 million homes by 2020. With a dire skills shortage and BREXIT looming these targets are incomprehensible to the UK construction and real estate sectors.