Whether you’re looking to increase your R&D, finance working capital, or recruit to further develop your company’s commercial activities, the purpose of fundraising remains the same: ensuring investors acquire a stake in your company’s capital.
Before you even get started, fundraising requires a lot of information and legal, financial, and strategic documents, among others. The first thing you’ll need to do is prepare the infamous “investor pack” that includes:
- A business plan
- A document of around twenty pages detailing the status of the project
- A market report justifying your project’s potential
- A pitch of a dozen slides for a live presentation
- A financial model
This “pack” is, of course, the result of strategic planning that emphasizes what investors are looking for in a project: potential, feasibility, credibility.
Whilst the market research study is only one part of this pack, it is still, however, an essential step if you want to raise funds. It is the most useful tool to validate and support potential investors in their decision to invest, or not, in your project.
Why carry out a market research study for fundraising purposes?
A market research study will enable you to not only understand your market and make the right decisions, but also convince business angels of your project’s potential. Through this, you will have the key to proving your value.
Give a global overview of your potential
An investor wants to be able to quickly judge your chances of success before investing time and money in your project. A complete and well-led market research study will allow you to combine all the answers to their questions in a single document and quickly provide evidence of your potential.
Ensure the reliability of the project
You’ll be able to use your market research study to easily answer the following questions: who are your target customers? Is there a market for the proposed goods and services? Who are your competitors?
You’ll therefore be able to show that you know where you are going and that you have a clear understanding of your market.
In addition, if the results of your study shows positive insights, your projects will thus have been validated by qualified, objective professionals, showing the investor that there is a real market ready to receive your innovation.
In addition to the reassurance it can provide, a market research study can also be a means to find investors. When you carry out a market research study, you communicate and make it known to professionals who may be interested in your innovation. Among those surveyed, there may be business angels or even investors willing to take a chance with you. By making yourself visible, you open the door to many more opportunities.
These elements all contribute to reassuring your potential investor by proving your good faith, effectiveness, and the relevance of your project.
A few tips to make market research a relevant tool
A structured, summarized market analysis report
Investors rarely read the detail or entirety of a 50-page market research study. They receive several per week. What are they looking for? To easily judge your innovation’s potential with a single glance.
This means that you need to produce a market analysis report that keep things to the bare minimum. It’s a difficult but key step in the fundraising process. You need to create a summarized, short and easy to read document to increase your credibility. After all, who would want to invest in your company if you give off the image of being overly verbose? The more concise you are, the more likely you are to be listened to.
However, investors don’t base their final decision solely on reading this report. If you manage to secure a meeting, the investor will, of course, have questions for you. If the market analysis report can answer some of these questions, that is very helpful, but you need to remember that its main purpose is to persuade the investor to give you that initial meeting. You should therefore be prepared to provide them with more detailed information.
A picture is worth 1,000 words. Graphics even more. They provide an immediate visual summary of figures and data to illustrate your market analysis report and make it more readable.
Be concrete and exciting. This will make you more credible and more likely to make a good impression.
Fundraising, of course, requires that you know how to sell your project. But extolling your innovation as the best thing since sliced bread won’t necessarily help you persuade investors. You need to provide concrete evidence of its usefulness and potential. To do this, base your argument on facts and figures that are representative and above all, objective, such as the comments and insights from the professionals you’ve surveyed. This is where the market research study enters into its own as it doesn’t put forward your opinion, but that of the market and your potential customers.
Market analysis reports are often too long, self-focused, and sometimes much too technical.
You doubtless know how to demonstrate that your concept is innovative and infallible. But the questions you need to know how to answer are those about the market potential: Who are you going to sell your innovation to? At what price? How? Listen to the market and demonstrate your knowledge!
For you, the most difficult part of this process will be learning to take a step back when you present your innovation. You’ll often tend to describe your innovation from a very technical perspective. Before launching your market research study, take the time to define your innovation in a format that can be understood by businesspeople and non-experts. This will be the best way to collect market-oriented feedback that will be much more reliable and understandable for potential investors.
Expressions of interest: let others do the convincing for you
When you carry out a market research study, you survey professionals who may be interested in your innovation, and thus inclined to express their interest. This gives you a formidable weapon in your communications arsenal.
Enable people surveyed to express their interest, and ensure their expressions of interest appear in your report. By doing this, you’ll be able to prove the interest potential clients or potential distributors have in your innovation. What could be more reassuring for an investor than seeing evidence of the traction generated by your project?
The market research study is a particularly useful and relevant tool to prove that your innovation is solid and coherent, worth investing time and money in. Using it should enable you to obtain meetings with business angels, partners, distributors and others to further develop your business with a carefully considered, strategic approach.
That being said, don’t forget that the main role of the market research study is to support you in demonstrating the feasibility of your project, and prevent you from groping along blindly on a path that ends in failure. Use it as a starting point and proceed step by step to make your innovation project a great success.