One of the phrases that policy-makers and start-ups seem to have picked up in recent months is “investment ready”. In learned gatherings all over the globe, beard-stroking wonks and earnest advisers assure us that if companies don’t get financed it’s because they’re not “investment ready”. Experts from highly reputed corporate finance houses tell keen and shiny start-up entrepreneurs that the one thing a company has to be sure of, even before it has any revenues , is that they are “investment ready.”
Investment ready is like oven-ready chips. Why do we have oven-ready chips? It’s so that hard-pressed housewives and home-husbands don’t have to do spud-bashing in the kitchen for hours on end, but can simply empty a sack of chips onto a hotplate and stick it in to a preheated oven. They don’t have to do the frying themselves.
But however much deep frying has been done in advance and so however “investment ready” a company has become, no investment house will simply stick it in its preheated investment oven and say “Bob’s your uncle, come back in seven years for your tasty evening meal”!
The reality is that investors want to get comfortable with what a business is, how it works, how the team works together, how the sales marketing works, how the development works, how the whole thing will scale…
That doesn’t come packaged in a luridly illustrated plastic bag out of the freezer. It comes from careful and thoughtful enquiry and due diligence. Unfortunately in the UK, companies still seem to have to prove much more than similar companies in the US. Today, an early stage US business is three or four times more likely to receive investment than an equivalent UK business. UK businesses have to go much further to market than their US counterparts, gain multiple concept proof points, win meaningful early contracts, show huge user uptake, point to the beginnings of recurrent revenues, be building a stronger pipeline – and of course prove that all of this can scale massively, globally.
And therein lies the rub. The need to scale globally is understandable and a must. The size of the US domestic market represents such a significant opportunity right on the doorstep of US businesses and Europe is simply not equivalent. That basic market reality dictates investor appetites and so maybe we should never expect it to get any easier in the UK, however oven ready the chips are. Discuss!